10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED AUGUST 2, 2014

OR

o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission file number 000-51217

SEARS HOLDINGS CORPORATION

(Exact name of registrant as specified in its charter)

DELAWARE	20-1920798
(State of Incorporation)	(I.R.S. Employer Identification No.)
3333 BEVERLY ROAD, HOFFMAN ESTATES, ILLINOIS	60179
(Address of principal executive offices)	(Zip Code)

Registrant’s Telephone Number, Including Area Code: (847) 286-2500

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes  x               No    ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes    x          No    ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer   x  Accelerated filer    ¨   Non-accelerated filer    ¨   Smaller reporting company    ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes    ¨            No    x

As of August 15, 2014, the registrant had 106,472,251 common shares, $0.01 par value, outstanding.

SEARS HOLDINGS CORPORATION

INDEX TO QUARTERLY REPORT ON FORM 10-Q

13 and 26 Weeks Ended August 2, 2014 and August 3, 2013

		Page
PART I – FINANCIAL INFORMATION
Item 1.	Financial Statements
	Condensed Consolidated Statements of Operations (Unaudited) for the 13 and 26 Weeks Ended August 2, 2014 and August 3, 2013	1
	Condensed Consolidated Statements of Comprehensive Loss (Unaudited) for the 13 and 26 Weeks Ended August 2, 2014 and August 3, 2014	2
	Condensed Consolidated Balance Sheets (Unaudited) at August 2, 2014, August 3, 2013 and February 1, 2014	3
	Condensed Consolidated Statements of Cash Flows (Unaudited) for the 26 Weeks Ended August 2, 2014 and August 3, 2013	4
	Condensed Consolidated Statements of Equity (Unaudited) for the 26 Weeks Ended August 2, 2014 and August 3, 2013	5
	Notes to Condensed Consolidated Financial Statements (Unaudited)	6
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	39
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	64
Item 4.	Controls and Procedures	65
PART II – OTHER INFORMATION
Item 1.	Legal Proceedings	66
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	66
Item 4.	Mine Safety Disclosures	66
Item 6.	Exhibits	67

SEARS HOLDINGS CORPORATION

Condensed Consolidated Statements of Operations

(Unaudited)

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

	13 Weeks Ended						26 Weeks Ended
millions, except per share data	August 2, 2014			August 3, 2013			August 2, 2014			August 3, 2013
REVENUES
Merchandise sales and services(1)	$	8,013		$	8,871		$	15,892		$	17,323
COSTS AND EXPENSES
Cost of sales, buying and occupancy(1)	6,271			6,685			12,322			12,981
Selling and administrative	2,118			2,291			4,207			4,509
Depreciation and amortization	152			187			307			378
Impairment charges	20			—			25			8
Gain on sales of assets	(34		)	(241		)	(80		)	(255		)
Total costs and expenses	8,527			8,922			16,781			17,621
Operating loss	(514		)	(51		)	(889		)	(298		)
Interest expense	(72		)	(59		)	(143		)	(120		)
Interest and investment income	32			14			36			21
Other income (loss)	5			(1		)	2			(1		)
Loss before income taxes	(549		)	(97		)	(994		)	(398		)
Income tax expense	(32		)	(30		)	(29		)	(21		)
Net loss	(581		)	(127		)	(1,023		)	(419		)
(Income) loss attributable to noncontrolling interests	8			(67		)	48			(54		)
NET LOSS ATTRIBUTABLE TO HOLDINGS' SHAREHOLDERS	$	(573	)	$	(194	)	$	(975	)	$	(473	)
NET LOSS PER COMMON SHARE ATTRIBUTABLE TO HOLDINGS' SHAREHOLDERS
Basic loss per share	$	(5.39	)	$	(1.83	)	$	(9.17	)	$	(4.46	)
Diluted loss per share	$	(5.39	)	$	(1.83	)	$	(9.17	)	$	(4.46	)
Basic weighted average common shares outstanding	106.3			106.1			106.3			106.1
Diluted weighted average common shares outstanding	106.3			106.1			106.3			106.1

⁽¹⁾ Includes merchandise sales to Sears Hometown and Outlet Stores, Inc. ("SHO") of $383 million and $386 million for the 13 weeks ended August 2, 2014 and August 3, 2013, respectively and $741 million and $755 million for the 26 weeks endedAugust 2, 2014 and August 3, 2013, respectively. Pursuant to the terms of the separation, merchandise is sold to SHO at cost.

See accompanying notes.

1

SEARS HOLDINGS CORPORATION

Condensed Consolidated Statements of Comprehensive Loss

(Unaudited)

	13 Weeks Ended						26 Weeks Ended
millions	August 2, 2014			August 3, 2013			August 2, 2014			August 3, 2013
Net loss	$	(581	)	$	(127	)	$	(1,023	)	$	(419	)
Other comprehensive income
Pension and postretirement adjustments, net of tax	35			48			65			94
Deferred loss on derivatives, net of tax	(1		)	—			(2		)	—
Currency translation adjustments, net of tax	3			(20		)	14			(27		)
Total other comprehensive income	37			28			77			67
Comprehensive loss	(544		)	(99		)	(946		)	(352		)
Comprehensive (income) loss attributable to noncontrolling interests	3			(61		)	37			(47		)
Comprehensive loss attributable to Holdings' shareholders	$	(541	)	$	(160	)	$	(909	)	$	(399	)

See accompanying notes.

2

SEARS HOLDINGS CORPORATION

Condensed Consolidated Balance Sheets

(Unaudited)

millions	August 2, 2014		August 3, 2013		February 1, 2014
ASSETS
Current assets
Cash and cash equivalents	$	829	$	671	$	1,028
Restricted cash	10		10		10
Accounts receivable(1)	516		641		553
Merchandise inventories	6,383		7,708		7,034
Prepaid expenses and other current assets	419		470		334
Total current assets	8,157		9,500		8,959
Property and equipment, net	5,091		5,786		5,394
Goodwill	269		379		379
Trade names and other intangible assets	2,302		2,864		2,850
Other assets	619		749		679
TOTAL ASSETS	$	16,438	$	19,278	$	18,261
LIABILITIES
Current liabilities
Short-term borrowings(2)	$	1,404	$	1,756	$	1,332
Current portion of long-term debt and capitalized lease obligations	85		75		83
Merchandise payables	2,506		2,903		2,496
Other current liabilities	2,374		2,435		2,527
Unearned revenues	889		925		900
Other taxes	436		484		460
Short-term deferred tax liabilities	484		382		387
Total current liabilities	8,178		8,960		8,185
Long-term debt and capitalized lease obligations(3)	2,815		1,911		2,834
Pension and postretirement benefits	1,721		2,539		1,942
Other long-term liabilities	2,007		2,081		2,008
Long-term deferred tax liabilities	798		963		1,109
Total Liabilities	15,519		16,454		16,078
Commitments and contingencies
EQUITY
Total Equity	919		2,824		2,183
TOTAL LIABILITIES AND EQUITY	$	16,438	$	19,278	$	18,261

⁽¹⁾ Includes $84 million, $77 million and $68 million at August 2, 2014, August 3, 2013 and February 1, 2014, respectively, of net amounts receivable from SHO.

⁽²⁾Includes $235 million of unsecured commercial paper held by ESL and its affiliates at August 3, 2013. ESL and its affiliates held none of our commercial paper at August 2, 2014 or February 1, 2014.

⁽³⁾ Includes $205 million of senior secured notes held by ESL and its affiliates at August 2, 2014, and $95 million at both August 3, 2013, and February 1, 2014, and $3 million of subsidiary notes held by ESL and its affiliates at August 2, 2014, August 3, 2013, and February 1, 2014.

See accompanying notes.

3

SEARS HOLDINGS CORPORATION

Condensed Consolidated Statements of Cash Flows

(Unaudited)

	26 Weeks Ended
millions	August 2, 2014			August 3, 2013
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss	$	(1,023	)	$	(419	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization	307			378
Impairment charges	25			8
Gain on sales of assets	(80		)	(255		)
Gain on sales of investments	(23		)	—
Pension and postretirement plan contributions	(205		)	(176		)
Settlement of Canadian dollar hedges	1			—
Change in operating assets and liabilities (net of acquisitions and dispositions):
Deferred income taxes	(36		)	12
Merchandise inventories	308			(183		)
Merchandise payables	46			157
Income and other taxes	(59		)	(12		)
Mark-to-market adjustments and settlements on Sears Canada derivative instruments	3			(1		)
Other operating assets	(26		)	(43		)
Other operating liabilities	15			(181		)
Net cash used in operating activities	(747		)	(715		)
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sales of property and investments	164			287
Net increase in investments and restricted cash	—			(1		)
Purchases of property and equipment	(126		)	(116		)
Net cash provided by investing activities	38			170
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from debt issuances	—			2
Repayments of long-term debt	(42		)	(46		)
Increase in short-term borrowings, primarily 90 days or less	72			662
Lands' End, Inc. pre-separation funding	515			—
Separation of Lands' End, Inc.	(31		)	—
Debt issuance costs	(11		)	—
Net cash provided by financing activities	503			618
Effect of exchange rate changes on cash and cash equivalents	7			(11		)
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS	(199		)	62
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR	1,028			609
CASH AND CASH EQUIVALENTS, END OF PERIOD	$	829		$	671
Supplemental Cash Flow Data:
Income taxes paid, net of refunds	$	89		$	32
Cash interest paid	117			98
Unpaid liability to acquire equipment and software	28			43

See accompanying notes.

4

SEARS HOLDINGS CORPORATION

Condensed Consolidated Statements of Equity

(Unaudited)

	Equity Attributable to Holdings’ Shareholders
millions	Number of Shares	Common Stock		Treasury Stock			Capital in Excess of Par Value			Retained Earnings (Deficit)			Accumulated Other Comprehensive Income (Loss)			Noncontrolling Interests			Total
Balance at February 2, 2013	106	$	1	$	(5,970	)	$	9,298		$	885		$	(1,459	)	$	417		$	3,172
Comprehensive loss
Net income (loss)	—	—		—			—			(473		)	—			54			(419		)
Pension and postretirement adjustments, net of tax	—	—		—			—			—			89			5			94
Currency translation adjustments, net of tax	—	—		—			—			—			(15		)	(12		)	(27		)
Total Comprehensive Loss																			(352		)
Stock awards	—	—		3			(1		)	—			—			—			2
Associate stock purchase	—	—		2			—			—			—			—			2
Balance at August 3, 2013	106	$	1	$	(5,965	)	$	9,297		$	412		$	(1,385	)	$	464		$	2,824
Balance at February 1, 2014	106	$	1	$	(5,963	)	$	9,298		$	(480	)	$	(1,117	)	$	444		$	2,183
Comprehensive loss
Net loss	—	—		—			—			(975		)	—			(48		)	(1,023		)
Pension and postretirement adjustments, net of tax	—	—		—			—			—			61			4			65
Deferred loss on derivatives, net of tax	—	—		—			—			—			(2		)	—			(2		)
Currency translation adjustments, net of tax	—	—		—			—			—			7			7			14
Total Comprehensive Loss																			(946		)
Stock awards	—	—		3			(2		)	—			—			—			1
Separation of Lands' End, Inc.	—	—		—			(323		)	—			2			—			(321		)
Associate stock purchase	—	—		2			—			—			—			—			2
Balance at August 2, 2014	106	$	1	$	(5,958	)	$	8,973		$	(1,455	)	$	(1,049	)	$	407		$	919

See accompanying notes.

5

SEARS HOLDINGS CORPORATION

Notes to Condensed Consolidated Financial Statements

(Unaudited)

NOTE 1 – BASIS OF PRESENTATION

Sears Holdings Corporation ("Holdings") is the parent company of Kmart Holding Corporation ("Kmart") and Sears, Roebuck and Co. ("Sears"). Holdings (together with its subsidiaries, "we," "us," "our," or the "Company") was formed as a Delaware corporation in 2004 in connection with the merger of Kmart and Sears (the "Merger"), on March 24, 2005. We are an integrated retailer with 1,870 full-line and specialty retail stores in the United States, operating through Kmart and Sears, and 432 full-line and specialty retail stores in Canada operating through Sears Canada Inc. ("Sears Canada"), a 51%-owned subsidiary. We have three reportable segments: Kmart, Sears Domestic and Sears Canada.

These interim unaudited Condensed Consolidated Financial Statements have been prepared in accordance with the rules and regulations of the Securities and Exchange Commission ("SEC"). Accordingly, they do not include all of the information and footnotes required in annual consolidated financial statements prepared in accordance with accounting principles generally accepted in the United States of America. In the opinion of management, all adjustments (which include normal recurring adjustments) considered necessary for a fair presentation have been included. Operating results for the interim period are not necessarily indicative of the results that may be expected for the full fiscal year. The retail business is seasonal in nature, and we generate a high proportion of our revenues and operating cash flows during the fourth quarter of our fiscal year, which includes the holiday season. These interim financial statements and related notes should be read in conjunction with the audited consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the fiscal year ended February 1, 2014.

Depreciation Expense

Depreciation expense included within depreciation and amortization expense reported on the Condensed Consolidated Statements of Operations was $147 million, $297 million, $181 million, and $361 million for the 13- and 26- week periods ended August 2, 2014 and August 3, 2013, respectively.

Separation of Lands' End, Inc.

On April 4, 2014, we completed the separation of our Lands' End business through a spin-off transaction. The separation was structured to be tax free to our U.S. shareholders for U.S. federal income tax purposes. Prior to the separation, Lands' End, Inc. ("Lands' End") entered into an asset-based senior secured revolving credit facility, which provides for maximum borrowings of approximately $175 million with a letter of credit sub-limit, and a senior secured term loan facility of approximately $515 million. The proceeds of the term loan facility were used to fund a $500 million dividend to Holdings and pay fees and expenses associated with the foregoing facilities. We accounted for this spin-off in accordance with accounting standards applicable to spin-off transactions. Accordingly, we classified the carrying value of net assets of $323 million contributed to Lands' End as a reduction of capital in excess of par value in the Condensed Consolidated Statement of Equity for the 26-week period ended August 2, 2014.

Additionally, as a result of Mr. Lampert's role as our Chairman and Chief Executive Officer, and Chairman and Chief Executive Officer of ESL Investments, Inc. (together with its affiliated funds, "ESL"), and the continuing arrangements between Holdings and Lands' End (as further described in Note 14), Holdings has determined that it has significant influence over Lands' End. Accordingly, the operating results for Lands' End through the date of the spin-off are presented within the consolidated continuing operations of Holdings and the Sears Domestic segment in the accompanying Condensed Consolidated Financial Statements.

In connection with the separation, Holdings and certain of its subsidiaries entered into various agreements with Lands' End under the terms described in Note 14.

6

SEARS HOLDINGS CORPORATION

Notes to Condensed Consolidated Financial Statements — (Continued)

(Unaudited)

Changes in the carrying amount of goodwill by segment, which reflects the impact related to the Lands’ End spin-off, were as follows:

millions	Sears Domestic
Balance, February 1, 2014:
Goodwill	$	379
2014 activity:
Separation of Lands' End, Inc.	(110		)
Balance, August 2, 2014	$	269

Changes in the carrying amount of trade names and other intangible assets by segment, which reflects the impact related to the Lands’ End spin-off, were as follows:

millions	Sears Domestic			Total
Balance, February 1, 2014:
Trade names and intangible assets	$	2,651		$	2,850
2014 activity:
Separation of Lands' End, Inc.	(531		)	(531		)
Amortization expense and other	(14		)	(17		)
Balance, August 2, 2014	$	2,106		$	2,302

NOTE 2 – BORROWINGS

Total borrowings were as follows:

millions	August 2, 2014		August 3, 2013		February 1, 2014
Short-term borrowings:
Unsecured commercial paper	$	7	$	247	$	9
Secured borrowings	1,397		1,509		1,323
Long-term debt, including current portion:
Notes and debentures outstanding	2,566		1,582		2,571
Capitalized lease obligations	334		404		346
Total borrowings	$	4,304	$	3,742	$	4,249

The fair value of long-term debt, excluding capitalized lease obligations, was $2.3 billion at August 2, 2014, $1.5 billion at August 3, 2013 and $2.3 billion at February 1, 2014. The fair value of our debt was estimated based on quoted market prices for the same or similar issues or on current rates offered to us for debt of the same remaining maturities. Our long-term debt instruments are valued using Level 2 measurements as defined in Note 4 to the Condensed Consolidated Financial Statements.

Debt Repurchase Authorization

In 2005, our Finance Committee of the Board of Directors authorized the repurchase, subject to market conditions and other factors, of up to $500 million of our outstanding indebtedness in open market or privately negotiated transactions. Our wholly owned finance subsidiary, Sears Roebuck Acceptance Corp. ("SRAC"), has repurchased $215 million of its outstanding notes. Holdings has repurchased $10 million of senior secured notes. The unused balance of this authorization is $275 million at August 2, 2014.

7

SEARS HOLDINGS CORPORATION

Notes to Condensed Consolidated Financial Statements — (Continued)

(Unaudited)

Unsecured Commercial Paper

We borrow through the commercial paper markets. At August 2, 2014, August 3, 2013 and February 1, 2014, we had outstanding commercial paper borrowings of $7 million, $247 million and $9 million, respectively. ESL held $235 million of our commercial paper at August 3, 2013, including $143 million held by Edward S. Lampert. Neither ESL nor Edward S. Lampert held any of our commercial paper at August 2, 2014 or February 1, 2014. See Note 14 for further discussion of these borrowings.

Domestic Credit Agreement

During the first quarter of 2011, SRAC, Kmart Corporation (together with SRAC, the "Borrowers") and Holdings entered into an amended credit agreement (the "Domestic Credit Agreement"). The Domestic Credit Agreement provides for a $3.275 billion asset-based revolving credit facility (the "Revolving Facility") with a $1.5 billion letter of credit sub-limit. On October 2, 2013, Holdings and the Borrowers entered into a First Amendment (the "Amendment") to the Domestic Credit Agreement with a syndicate of lenders. Pursuant to the Amendment, the Borrowers borrowed $1.0 billion under a senior secured term loan facility (the "Term Loan").

Advances under the Domestic Credit Agreement bear interest at a rate equal to, at the election of the Borrowers, either the London Interbank Offered Rate ("LIBOR") or a base rate, in either case plus an applicable margin. The Domestic Credit Agreement’s interest rates for LIBOR-based borrowings vary based on leverage in the range of LIBOR plus 2.0% to 2.5%. Interest rates for base rate-based borrowings vary based on leverage in the range of the applicable base rate plus 1.0% to 1.5%. Commitment fees are in a range of 0.375% to 0.625% based on usage. The Revolving Facility is in place as a funding source for general corporate purposes and is secured by a first lien on our domestic inventory and credit card and pharmacy receivables, and is subject to a borrowing base formula to determine availability. The Domestic Credit Agreement permits aggregate second lien indebtedness of up to $2.0 billion, of which $1.2 billion in second lien notes were outstanding at August 2, 2014, resulting in $760 million of permitted second lien indebtedness, subject to limitations imposed by a borrowing base requirement under the indenture that governs our 6 5/8% senior secured notes due 2018. The Revolving Facility is expected to expire in April 2016.

The Term Loan bears interest at a rate equal to, at the election of the Borrowers, either (1) LIBOR (subject to a 1.00% LIBOR floor) or (2) the highest of (x) the prime rate of the bank acting as agent of the syndicate of lenders, (y) the federal funds rate plus 0.50% and (z) the one-month LIBOR rate plus 1.00% (the highest of (x), (y) and (z), the "Base Rate"), plus an applicable margin for LIBOR loans of 4.50% and for Base Rate loans of 3.50%. Beginning February 2, 2014, the Borrowers are required to repay the Term Loan in quarterly installments of $2.5 million, with the remainder of the Term Loan maturing June 30, 2018. Beginning with the fiscal year ending January 2015, the Borrowers are also required to make certain mandatory repayments of the Term Loan from excess cash flow (as defined in the Domestic Credit Agreement). The Term Loan may be prepaid in whole or part without penalty, other than a 1.00% prepayment premium if the Borrowers enter into certain repricing transactions with respect to the Term Loan prior to October 2, 2014. The Term Loan is secured by the same collateral as the Revolving Facility on a pari passu basis with the Revolving Facility, and is guaranteed by the same subsidiaries of the Company that guarantee the Revolving Facility.

The Domestic Credit Agreement limits our ability to make restricted payments, including dividends and share repurchases, subject to specified exceptions that are available if, in each case, no event of default under the credit facility exists immediately before or after giving effect to the restricted payment. These include exceptions that require that projected availability under the credit facility, as defined, is at least 15% and an exception that requires that the restricted payment is funded from cash on hand and not from borrowings under the credit facility or from the proceeds of certain dividends or asset sales. The Domestic Credit Agreement also imposes various other requirements, which take effect if availability falls below designated thresholds, including a cash dominion requirement and a requirement that the fixed charge ratio at the last day of any quarter be not less than 1.0 to 1.0. If availability were to fall below 10%, the Company would not comply with the springing fixed charge coverage ratio covenant, and the lenders under our domestic credit facility could demand immediate payment in full of all amounts outstanding and terminate their obligations under the facility.

At August 2, 2014, August 3, 2013 and February 1, 2014, we had $1.4 billion, $1.5 billion and $1.3 billion, respectively, of Revolving Facility borrowings and $646 million, $680 million and $661 million, respectively, of

8

SEARS HOLDINGS CORPORATION

Notes to Condensed Consolidated Financial Statements — (Continued)

(Unaudited)

letters of credit outstanding under the Revolving Facility. At August 2, 2014 and February 1, 2014, the amount available to borrow under the Revolving Facility was $240 million and $549 million, respectively, which reflects the effect of the springing fixed charge coverage ratio covenant and the borrowing base limitation. At August 3, 2013, the amount available to borrow was $759 million, which reflects the effect of the springing fixed charge coverage ratio covenant, while the borrowing base requirement had no effect on availability. The majority of the letters of credit outstanding are used to provide collateral for our insurance programs. At August 2, 2014 and February 1, 2014, we had $995 million and $1.0 billion, respectively, of borrowings under the Term Loan.

Senior Secured Notes

In October 2010, we sold $1.0 billion aggregate principal amount of senior secured notes (the "Notes"), which bear interest at 6 5/8% per annum and mature on October 15, 2018. Concurrent with the closing of the sale of the Notes, the Company sold $250 million aggregate principal amount of Notes to the Company's domestic pension plan in a private placement, of which approximately $110 million remains in the domestic pension plan. The Notes are guaranteed by certain subsidiaries of the Company and are secured by a security interest in certain assets consisting primarily of domestic inventory and credit card receivables (the "Collateral"). The lien that secures the Notes is junior in priority to the lien on such assets that secures obligations under the Domestic Credit Agreement, as well as certain other first priority lien obligations. The Company used the net proceeds of this offering to repay borrowings outstanding under a previous domestic credit agreement on the settlement date and to fund the working capital requirements of our retail businesses, capital expenditures and for general corporate purposes. The indenture under which the Notes were issued contains restrictive covenants that, among other things, (1) limit the ability of the Company and certain of its domestic subsidiaries to create liens and enter into sale and leaseback transactions and (2) limit the ability of the Company to consolidate with or merge into, or sell other than for cash or lease all or substantially all of its assets to, another person. The indenture also provides for certain events of default, which, if any were to occur, would permit or require the principal and accrued and unpaid interest on all the then outstanding notes to be due and payable immediately. Generally, the Company is required to offer to repurchase all outstanding Notes at a purchase price equal to 101% of the principal amount upon the occurrence of certain change of control triggering events. Moreover, if the borrowing base (as calculated pursuant to the indenture) falls below the principal amount of the Notes plus the principal amount of any other indebtedness for borrowed money that is secured by liens on the collateral for the Notes on the last day of any two consecutive quarters, it could trigger an obligation to repurchase notes in an amount equal to such deficiency. The Company may call the Notes at a premium based on the "Treasury Rate" as defined in the indenture, plus 50 basis points. On September 6, 2011, we completed our offer to exchange the Notes held by nonaffiliates for a new issue of substantially identical notes registered under the Securities Act of 1933, as amended.

Sears Canada Credit Agreement

In September 2010, Sears Canada entered into a five-year, $800 million Canadian senior secured revolving credit facility (the "Sears Canada Facility"). On May 28, 2014, Sears Canada announced that it had extended the term of the Sears Canada Facility (the "Amended Sears Canada Facility") to May 28, 2019 and reduced the total credit limit to $300 million Canadian.

The Amended Sears Canada Facility is available for Sears Canada's general corporate purposes and is secured by a first lien on inventory and credit card receivables. Availability under the Amended Sears Canada Facility is determined pursuant to a borrowing base formula based on inventory and credit card receivables, subject to certain limitations, up to a maximum availability of $300 million Canadian. At August 2, 2014, we had no borrowings outstanding under the Amended Sears Canada Facility, and at August 3, 2013 and February 1, 2014, we had no borrowings under the Sears Canada Facility. Availability under the Amended Sears Canada Facility was approximately $246 million ($268 million Canadian) at August 2, 2014, and availability under the Sears Canada Facility was approximately $530 million ($551 million Canadian) and $336 million ($374 million Canadian), respectively, at August 3, 2013 and February 1, 2014. The borrowing base formula may be reduced by reserves currently estimated by the Company to be approximately $122 million, which may be applied by the lenders at their discretion pursuant to the Amended Sears Canada Facility agreement. In 2013, as a result of judicial developments relating to the priorities of pension liability relative to certain secured obligations, Sears Canada provided additional security to the lenders by pledging certain real estate assets as collateral, thereby partially reducing the potential

9

SEARS HOLDINGS CORPORATION

Notes to Condensed Consolidated Financial Statements — (Continued)

(Unaudited)

reserve amount the lenders could apply. The potential additional reserve amount may increase or decrease in the future based on changes in estimated net pension liabilities.

Wholly owned Insurance Subsidiary and Intercompany Securities

We have numerous types of insurable risks, including workers' compensation, product and general liability, automobile, warranty, asbestos and environmental claims and the extended service contracts we sell to our customers. In addition, we provide credit insurance to third party creditors of the Company to mitigate their credit risk with the Company. The associated risks are managed through Holdings' wholly owned insurance subsidiary, Sears Reinsurance Company Ltd. ("Sears Re"), a Bermuda Class 3 insurer.

In accordance with applicable insurance regulations, Sears Re holds marketable securities to support the insurance coverage it provides. Sears has utilized two securitization structures to issue specific securities in which Sears Re has invested its capital to fund its insurance obligations. In November 2003, Sears formed a Real Estate Mortgage Investment Conduit, or REMIC. The real estate associated with 125 Full-line stores was contributed to indirect wholly owned subsidiaries of Sears, and then leased back to Sears. The contributed stores were mortgaged and the REMIC issued to wholly owned subsidiaries of Sears (including Sears Re) $1.3 billion (par value) of securities (the "REMIC Securities") that are secured by the mortgages and collateral assignments of the store leases. Payments to the holders on the REMIC Securities are funded by the lease payments. In May 2006, a subsidiary of Holdings contributed the rights to use the Kenmore, Craftsman and DieHard trademarks in the U.S. and its possessions and territories to KCD IP, LLC, an indirect wholly owned subsidiary of Holdings. KCD IP, LLC has licensed the use of the trademarks to subsidiaries of Holdings, including Sears and Kmart. Asset-backed securities with a par value of $1.8 billion (the "KCD Securities") were issued by KCD IP, LLC and subsequently purchased by Sears Re, the collateral for which includes the trademark rights and royalty income. Payments to the holders on the KCD Securities are funded by the royalty payments. The issuers of the REMIC Securities and KCD Securities and the owners of these real estate and trademark assets are bankruptcy remote, special purpose entities that are indirect wholly owned subsidiaries of Holdings. Cash flows received from rental streams and licensing fee streams paid by Sears, Kmart, other affiliates and third parties, are used for the payment of fees and interest on these securities. In the fourth quarter of fiscal 2013, Holdings contributed all of the outstanding capital stock of Sears Re to SRe Holding Corporation, a direct wholly owned subsidiary of Holdings. Sears Re thereafter reduced its excess statutory capital through the distribution of all REMIC Securities held by it to SRe Holding Corporation. Since the inception of the REMIC and KCD IP, LLC, the REMIC Securities and the KCD Securities have been entirely held by our wholly owned consolidated subsidiaries. At August 2, 2014, August 3, 2013 and February 1, 2014, the net book value of the securitized trademark rights was approximately $1.0 billion. The net book value of the securitized real estate assets was approximately $0.7 billion at August 2, 2014, August 3, 2013 and February 1, 2014.

Trade Creditor Matters

We have ongoing discussions concerning our liquidity and financial position with the vendor community and third parties that offer various credit protection services to our vendors. The topics discussed have included such areas as pricing, payment terms and ongoing business arrangements. As of the date of this report, we have not experienced any significant disruption in our access to merchandise or our operations.

NOTE 3 – DERIVATIVE FINANCIAL INSTRUMENTS

We primarily use derivatives as a risk management tool to decrease our exposure to fluctuations in the foreign currency market, and do not use derivative financial instruments for trading or speculative purposes. We are exposed to fluctuations in foreign currency exchange rates as a result of our net investment in Sears Canada. Further, Sears Canada is exposed to fluctuations in foreign currency exchange rates due to inventory purchase contracts denominated in U.S. dollars. The recorded amounts and corresponding gains on the hedging activity were not material at August 2, 2014, August 3, 2013 or February 1, 2014, or for the 13- and 26- week periods ended August 2, 2014 or August 3, 2013.

10

SEARS HOLDINGS CORPORATION

Notes to Condensed Consolidated Financial Statements — (Continued)

(Unaudited)

Hedges of Net Investment in Sears Canada

During the second quarter of 2014, we entered into foreign currency forward contracts with a total Canadian notional value of $300 million, and with a weighted-average remaining life of 0.1 years at August 2, 2014. These contracts were designated and qualify as hedges of the foreign currency exposure of our net investment in Sears Canada.

For derivatives that were designated as hedges of our net investment in Sears Canada, we assess effectiveness based on changes in forward currency exchange rates. Changes in forward rates on the derivatives are recorded in the currency translation adjustments line in accumulated other comprehensive loss and will remain there until we substantially liquidate or sell our holdings in Sears Canada.

We settled foreign currency forward contracts during the 13-week period ended August 2, 2014 and will pay $0.5 million relative to these contract settlements. We settled foreign currency forward contracts and received net amounts of $1 million during the 26-week period ended August 2, 2014, relative to these contract settlements. As hedge accounting was applied to these contracts, an offsetting amount was recorded as a component of other comprehensive loss.

Sears Canada Hedges of Merchandise Purchases

At August 2, 2014, Sears Canada had $205 million notional amount of foreign exchange forward contracts. These forward contracts are used to reduce the foreign exchange risk with respect to U.S. dollar denominated assets and liabilities and purchases of goods or services.

Sears Canada has merchandise purchase contracts denominated in U.S. currency. The merchandise purchase contracts are considered embedded derivatives under relevant accounting rules.

We record mark-to-market adjustments for the fair value of forward contracts and embedded derivatives at the end of each period. Changes in the fair value of any derivatives that are not designated as hedges are recorded in earnings each period. Sears Canada mitigates the risk of foreign currency exchange rates by entering into foreign exchange forward contracts. Since the Company's functional currency is the U.S. dollar, we are not directly exposed to the risk of exchange rate changes due to Sears Canada's contracts, and therefore we do not account for these instruments as a hedge of our foreign currency exposure risk.

Counterparty Credit Risk

We actively manage the risk of nonpayment by our derivative counterparties by limiting our exposure to individual counterparties based on credit ratings, value at risk and maturities. The counterparties to these instruments are major financial institutions with investment grade credit ratings or better at August 2, 2014, August 3, 2013 and February 1, 2014.

NOTE 4 – FAIR VALUE OF FINANCIAL ASSETS AND LIABILITIES

We determine fair value of financial assets and liabilities based on the following fair value hierarchy, which prioritizes the inputs to valuation techniques used to measure fair value into three levels:

Level 1 inputs – unadjusted quoted prices in active markets for identical assets or liabilities that we have the ability to access. An active market for the asset or liability is one in which transactions for the asset or liability occur with sufficient frequency and volume to provide ongoing pricing information.

Level 2 inputs – inputs other than quoted market prices included in Level 1 that are observable, either directly or indirectly, for the asset or liability. Level 2 inputs include, but are not limited to, quoted prices for similar assets or liabilities in an active market, quoted prices for identical or similar assets or liabilities in markets that are not active and inputs other than quoted market prices that are observable for the asset or liability, such as interest rate curves and yield curves observable at commonly quoted intervals, volatilities, credit risk and default rates.

Level 3 inputs – unobservable inputs for the asset or liability.

11

SEARS HOLDINGS CORPORATION

Notes to Condensed Consolidated Financial Statements — (Continued)

(Unaudited)

Accounts receivable, merchandise payables, short-term borrowings, accrued liabilities, cash and domestic cash equivalents are reflected in the Condensed Consolidated Balance Sheets at cost, which approximates fair value due to the short-term nature of these instruments. The fair value of our long-term debt is disclosed in Note 2 to the Condensed Consolidated Financial Statements. The following tables provide the fair value measurement amounts for other financial assets and liabilities recorded in our Condensed Consolidated Balance Sheets at fair value at August 2, 2014, August 3, 2013 and February 1, 2014:

millions	Total Fair Value Amounts at August 2, 2014		Level 1		Level 2		Level 3
Cash equivalents(1)	$	55	$	55	$	—	$	—
Restricted cash(2)	10		10		—		—
Foreign currency derivative assets(3)	4		—		4		—
Total	$	69	$	65	$	4	$	—

millions	Total Fair Value Amounts at August 3, 2013			Level 1		Level 2			Level 3
Cash equivalents(1)	$	211		$	211	$	—		$	—
Restricted cash(2)	10			10		—			—
Foreign currency derivative assets(3)	1			—		1			—
Foreign currency derivative liabilities(4)	(1		)	—		(1		)	—
Total	$	221		$	221	$	—		$	—

millions	Total Fair Value Amounts at February 1, 2014		Level 1		Level 2		Level 3
Cash equivalents(1)	$	346	$	346	$	—	$	—
Restricted cash(2)	10		10		—		—
Foreign currency derivative assets(3)	8		—		8		—
Total	$	364	$	356	$	8	$	—

⁽¹⁾  Included within Cash and cash equivalents in our Condensed Consolidated Balance Sheets.

⁽²⁾  Included within Restricted cash in our Condensed Consolidated Balance Sheets.

⁽³⁾  Included within Prepaid expenses and other current assets in our Condensed Consolidated Balance Sheets.

⁽⁴⁾  Included within Accrued expenses and other current liabilities in our Condensed Consolidated Balance Sheets.

The fair values of derivative assets and liabilities traded in the over-the-counter market are determined using quantitative models that require the use of multiple inputs including interest rates, prices and indices to generate pricing and volatility factors. The predominance of market inputs are actively quoted and can be validated through external sources, including brokers, market transactions and third-party pricing services. Our derivative instruments are valued using Level 2 measurements.

Assets and Liabilities that are Measured at Fair Value on a Nonrecurring Basis

Assets and liabilities that are measured at fair value on a nonrecurring basis relate primarily to our tangible fixed assets, goodwill and other intangible assets, which are remeasured when the derived fair value is below carrying value on our Condensed Consolidated Balance Sheets. For these assets, we do not periodically adjust carrying value to fair value except in the event of impairment. When we determine that impairment has occurred, we measure the impairment and adjust the carrying value. With the exception of the fixed asset impairments described in Note 6, we had no significant remeasurements of such assets or liabilities to fair value during the 13- and 26- week periods ended August 2, 2014 and August 3, 2013.

12

SEARS HOLDINGS CORPORATION

Notes to Condensed Consolidated Financial Statements — (Continued)

(Unaudited)

All of the fair value remeasurements were based on significant unobservable inputs (Level 3). Fixed asset fair values were derived based on discussions with real estate brokers, review of comparable properties, if available, and internal expertise related to the current marketplace conditions.

NOTE 5 – SEARS CANADA

Sears Holdings Ownership of Sears Canada

At August 2, 2014, August 3, 2013 and February 1, 2014, Sears Holdings was the beneficial holder of approximately 52 million, or 51% of the common shares of Sears Canada.

Sears Canada Share Repurchases

During the second quarter of 2013, Sears Canada renewed its Normal Course Issuer Bid with the Toronto Stock Exchange that permits it to purchase for cancellation up to 5% of its issued and outstanding common shares, representing approximately 5.1 million common shares. The purchase authorization expired on May 23, 2014. There were no share purchases during the 13- and 26- week periods ended August 2, 2014 and August 3, 2013.

Update on our Interest in Sears Canada

On May 14, 2014, we announced that we are exploring strategic alternatives for our 51% interest in Sears Canada, which has a current market value of approximately $765 million as of August 19, 2014, including a potential sale of our interest or Sears Canada as a whole. In connection with these efforts, we engaged BofA Merrill Lynch. Sears Canada's Board of Directors has advised us that Sears Canada's board and management intend to cooperate fully with us in this process to achieve value for all shareholders.

NOTE 6 – STORE CLOSING CHARGES, IMPAIRMENTS AND REAL ESTATE TRANSACTIONS

In accordance with accounting standards governing costs associated with exit or disposal activities, expenses related to future rent payments for which we no longer intend to receive any economic benefit are accrued for when we cease to use the leased space and have been reduced for any income that we believe can be realized through sub-leasing the leased space. During the second quarter of 2014, we closed 46 stores in our Kmart segment and eight stores in our Sears Domestic segment we previously announced would close, and recorded charges for the related lease obligations of $11 million for 46 of these stores in our Kmart segment and $2 million for five of these stores in our Sears Domestic segment. During the first half of 2014, we closed 75 stores in our Kmart segment and 21 stores in our Sears Domestic segment we previously announced would close, and recorded charges for the related lease obligations of $11 million for 51 of these stores in our Kmart segment and $3 million for 12 of these stores in our Sears Domestic segment.

We expect to record additional charges of approximately $16 million during the remainder of 2014 related to stores we had previously made the decision to close.

During the second quarter of 2013, we closed 16 stores in our Kmart segment and 10 stores in our Sears Domestic segment we previously announced would close. During the first half of 2013, we closed 27 stores in our Kmart segment and 10 stores in our Sears Domestic segment we previously announced would close, and recorded charges for the related lease obligations of $1 million for four of these stores in our Kmart segment.

We made the decision to close 26 stores in our Kmart segment and two stores in our Sears Domestic segment during the second quarter of 2014, and 40 stores in our Kmart segment and six stores in our Sears Domestic segment during the first half of 2014.

We made the decision to close 12 stores in our Kmart segment and six stores in our Sears Domestic segment during the second quarter of 2013, and 25 stores in our Kmart segment and 12 stores in our Sears Domestic segment during the first half of 2013.

13

SEARS HOLDINGS CORPORATION

Notes to Condensed Consolidated Financial Statements — (Continued)

(Unaudited)

Store closing costs and severance recorded for the 13- and 26- week periods ended August 2, 2014 and August 3, 2013 were as follows:

millions	Markdowns(1)		Severance Costs(2)		Lease Termination Costs(2)			Other Charges(2)		Impairment and Accelerated Depreciation(3)		Total Store Closing Costs
Kmart	$	10	$	3	$	11		$	3	$	3	$	30
Sears Domestic	—		2		4			1		3		10
Sears Canada	1		4		—			—		—		5
Total for the 13-week period ended August 2, 2014	$	11	$	9	$	15		$	4	$	6	$	45
Kmart	$	4	$	1	$	—		$	3	$	—	$	8
Sears Domestic	3		1		(3		)	1		1		3
Total for the 13-week period ended August 3, 2013	$	7	$	2	$	(3	)	$	4	$	1	$	11
Kmart	$	15	$	4	$	11		$	6	$	3	$	39
Sears Domestic	2		2		2			1		8		15
Sears Canada	1		9		5			—		—		15
Total for the 26-week period ended August 2, 2014	$	18	$	15	$	18		$	7	$	11	$	69
Kmart	$	9	$	2	$	(1	)	$	6	$	1	$	17
Sears Domestic	6		2		(6		)	3		9		14
Sears Canada	—		2		—			—		—		2
Total for the 26-week period ended August 3, 2013	$	15	$	6	$	(7	)	$	9	$	10	$	33

_____________

⁽¹⁾  Recorded within Cost of sales, buying and occupancy on the Condensed Consolidated Statements of Operations.

⁽²⁾  Recorded within Selling and administrative on the Condensed Consolidated Statements of Operations. Lease termination costs are net of estimated sublease income, and include the reversal of closed store reserves for which the lease agreement has been terminated and the reversal of deferred rent balances related to closed stores.

⁽³⁾  Costs for the 13-week period ended August 2, 2014 include $5 million recorded within Impairment charges and $1 million recorded within Depreciation and amortization on the Condensed Consolidated Statement of Operations. Costs for the 13-week period ended August 3, 2013 are recorded within Depreciation and amortization on the Condensed Consolidated Statements of Operations. Costs for the 26-week periods ended August 2, 2014 and August 3, 2013 include $10 million and $8 million recorded within Impairment charges, respectively, and $1 million and $2 million recorded within Depreciation and amortization, respectively, on the Condensed Consolidated Statements of Operations.

14

SEARS HOLDINGS CORPORATION

Notes to Condensed Consolidated Financial Statements — (Continued)

(Unaudited)

Store closing cost accruals of $175 million, $157 million and $199 million at August 2, 2014, August 3, 2013 and February 1, 2014, respectively, were as follows:

millions	Severance Costs			Lease Termination Costs			Other Charges			Total
Balance at August 3, 2013	$	23		$	119		$	15		$	157
Store closing costs	53			10			11			74
Store closing capital lease obligations	—			2			—			2
Payments/utilizations	(13		)	(12		)	(9		)	(34		)
Balance at February 1, 2014	63			119			17			199
Store closing costs	15			19			7			41
Payments/utilizations	(39		)	(13		)	(13		)	(65		)
Balance at August 2, 2014	$	39		$	125		$	11		$	175

Long-Lived Assets

In accordance with accounting standards governing the impairment or disposal of long-lived assets, we performed an impairment test of certain of our long-lived assets (principally the value of buildings and other fixed assets associated with our stores) due to events and changes in circumstances during the 13-week period ended August 2, 2014 that indicated an impairment might have occurred. The impairment review was triggered by a decline in operating performance at certain locations within the Sears Canada segment. As a result of this impairment testing, the Company recorded impairment charges of $15 million during the 13- and 26- week periods ended August 2, 2014 at Sears Canada.

Real Estate Transactions

During the first half of 2014, we recorded gains on the sales of assets of $80 million in connection with real estate transactions, which included a gain of $13 million recognized on the sale of a distribution facility in our Sears Domestic segment for which we received $16 million of cash proceeds and a gain of $10 million recognized on the sale of a Kmart store for which we received $10 million of cash proceeds.

Also, during the first half of 2014, we entered into agreements for the surrender and early termination of two Sears Full-line store leases for which we received $64 million of cash proceeds. The gains will be deferred until the lease termination agreements are effective and we have surrendered substantially all of our rights and obligations.

Additionally, during the second quarter of 2014, we recorded investment income of $23 million related to the sale of a 15% joint venture interest in one property Sears Canada owned with Ivanhoe Cambridge II Inc., for which Sears Canada received $30 million ($33 million Canadian) in cash proceeds.

During the first half of 2013, we recorded gains on the sales of assets of $255 million in connection with real estate transactions which included a gain of $180 million recognized in the second quarter on the amendment and early termination of the leases on two properties operated by Sears Canada for which Sears Canada received $184 million ($191 million Canadian) in cash proceeds. Gains on sales of assets recorded in the first half of 2013 also included gains of $55 million related to the sale of a store previously operated under The Great Indoors format, two Sears Full-line stores and one Kmart store for which the Company received $86 million of cash proceeds.

15

SEARS HOLDINGS CORPORATION

Notes to Condensed Consolidated Financial Statements — (Continued)

(Unaudited)

NOTE 7 – EQUITY

Accumulated Other Comprehensive Loss

The following table displays the components of accumulated other comprehensive loss:

millions	August 2, 2014			August 3, 2013			February 1, 2014
Pension and postretirement adjustments (net of tax of $(326), $(441) and $(328), respectively)	$	(975	)	$	(1,319	)	$	(1,036	)
Cumulative unrealized derivative gain (net of tax of $0 for all periods presented)	—			—			2
Currency translation adjustments (net of tax of $(37), $(40) and $(38), respectively)	(74		)	(66		)	(83		)
Accumulated other comprehensive loss	$	(1,049	)	$	(1,385	)	$	(1,117	)

Pension and postretirement adjustments relate to the net actuarial loss on our pension and postretirement plans recognized as a component of accumulated other comprehensive loss.

Accumulated other comprehensive loss attributable to noncontrolling interests at August 2, 2014, August 3, 2013 and February 1, 2014 was $42 million, $71 million and $53 million, respectively.

Income Tax Expense Allocated to Each Component of Other Comprehensive Income

Income tax expense allocated to each component of other comprehensive income was as follows:

	13 Weeks Ended August 2, 2014									13 Weeks Ended August 3, 2013
millions	Before Tax Amount			Tax Expense			Net of Tax Amount			Before Tax Amount			Tax Expense			Net of Tax Amount
Other comprehensive income
Pension and postretirement adjustments(1)	$	37		$	(2	)	$	35		$	49		$	(1	)	$	48
Deferred loss on derivatives	(1		)	—			(1		)	—			—			—
Currency translation adjustments	3			—			3			(20		)	—			(20		)
Total other comprehensive income	$	39		$	(2	)	$	37		$	29		$	(1	)	$	28

	26 Weeks Ended August 2, 2014									26 Weeks Ended August 3, 2013
millions	Before Tax Amount			Tax Expense			Net of Tax Amount			Before Tax Amount			Tax (Expense) Benefit			Net of Tax Amount
Other comprehensive income
Pension and postretirement adjustments(1)	$	68		$	(3	)	$	65		$	97		$	(3	)	$	94
Deferred loss on derivatives	(2		)	—			(2		)	—			—			—
Currency translation adjustments	15			(1		)	14			(28		)	1			(27		)
Total other comprehensive income	$	81		$	(4	)	$	77		$	69		$	(2	)	$	67

⁽¹⁾  Included in the computation of net periodic benefit expense. See Note 8 to the Condensed Consolidated Financial Statements.

Common Share Repurchase Program

During the 13- and 26- week periods ended August 2, 2014 and August 3, 2013, we did not repurchase any shares of our common stock under our common share repurchase program. At August 2, 2014, we had approximately $504 million of remaining authorization under our common share repurchase program.

The share repurchase program has no stated expiration date and share repurchases may be implemented using a variety of methods, which may include open market purchases, privately negotiated transactions, block trades,

16

SEARS HOLDINGS CORPORATION

Notes to Condensed Consolidated Financial Statements — (Continued)

(Unaudited)

accelerated share repurchase transactions, the purchase of call options, the sale of put options or otherwise, or by any combination of such methods.

NOTE 8 – BENEFIT PLANS

Pension and Postretirement Benefit Plans

We provide benefits to certain associates who are eligible under various defined benefit pension plans, contributory defined benefit pension plans and other postretirement plans, primarily retiree medical benefits. For purposes of determining the periodic expense of our defined benefit plans, we use the fair value of plan assets as the market related value. The following table summarizes the components of total net periodic benefit expense, recorded within Selling and administrative on the Condensed Consolidated Statements of Operations, for our retirement plans:

	13 Weeks Ended						26 Weeks Ended
millions	August 2, 2014			August 3, 2013			August 2, 2014			August 3, 2013
Components of net periodic expense:
Interest cost	$	82		$	75		$	151		$	150
Expected return on plan assets	(92		)	(77		)	(169		)	(154		)
Amortization of experience losses	31			49			62			97
Net periodic expense	$	21		$	47		$	44		$	93

Contributions

During the 13- and 26- week periods ended August 2, 2014, we made total contributions of $103 million and $205 million, respectively, to our pension and postretirement plans. During the 13- and 26- week periods ended August 3, 2013, we made total contributions of $87 million and $176 million, respectively, to our pension and postretirement plans. We anticipate making aggregate contributions to our domestic and Canadian defined benefit and postretirement plans of approximately $255 million over the remainder of 2014, which is lower than previously anticipated due to new legislation which was recently enacted that amends existing funding requirements for our domestic pension plans.

NOTE 9 – INCOME TAXES

We had gross unrecognized tax benefits of $141 million at August 2, 2014, $142 million at August 3, 2013 and $150 million at February 1, 2014. Of the amount at August 2, 2014, $86 million, would, if recognized, impact our effective tax rate, with the remaining amount being comprised of unrecognized tax benefits related to gross temporary differences or any other indirect benefits. During the 13-week period ended August 2, 2014, we made no reductions to gross unrecognized tax benefits. During the 26-week period ended August 2, 2014, gross unrecognized tax benefits were decreased by $9 million due to the Lands' End spin-off and foreign activity. During the 13- and 26- week periods ended August 3, 2013, gross unrecognized tax benefits were decreased by $9 million and $19 million, respectively, due to foreign and state audit activity. We expect that our unrecognized tax benefits could decrease by as much as $6 million over the next 12 months for tax audit settlements and the expiration of the statute of limitations for certain jurisdictions.

We classify interest expense and penalties related to unrecognized tax benefits and interest income on tax overpayments as components of income tax expense. At August 2, 2014, August 3, 2013 and February 1, 2014, the total amount of interest and penalties included in our tax accounts in our Condensed Consolidated Balance Sheet was $53 million ($36 million net of federal benefit), $51 million ($35 million net of federal benefit), and $53 million ($36 million net of federal benefit), respectively. The total amount of net interest expense recognized as part of income tax expense in our Condensed Consolidated Statements of Operations was $1 million and $3 million (net of federal benefit) for the 13- and 26- week periods ended August 2, 2014, respectively.

On April 4, 2014, Holdings and Lands' End entered into a tax sharing agreement in connection with the spin-off. Pursuant to this agreement, Holdings is responsible for all pre-separation U.S. federal, state and local income taxes

17

SEARS HOLDINGS CORPORATION

Notes to Condensed Consolidated Financial Statements — (Continued)

(Unaudited)

attributable to the Lands’ End business, and Lands’ End is responsible for all other income taxes attributable to its business, including all foreign taxes.

We file income tax returns in the United States, as well as various foreign jurisdictions. The IRS has completed its examination of all federal income tax returns of Holdings through the 2009 return, and all matters arising from such examinations have been resolved. In addition, Holdings and Sears are under examination by various state, local and foreign income tax jurisdictions for the years 2002 through 2012, and Kmart is under examination by such jurisdictions for the years 2003 through 2012.

At the end of 2013, we had a federal and state net operating loss ("NOL") deferred tax asset of $1.2 billion, which will expire predominately between 2019 and 2034. We have credit carryforwards of $721 million, which will expire between 2015 and 2034.

At February 1, 2014, we had a valuation allowance of $3.4 billion to record only the portion of the deferred tax asset that more likely than not will be realized. The amount of the deferred tax asset considered realizable, however, could be adjusted in the future if estimates of future taxable income during the carryforward period are reduced or increased, or if objective negative evidence in the form of cumulative losses is no longer present and additional weight may be given to subjective evidence such as our projections for growth. We will continue to evaluate our valuation allowance as the year progresses for any change in circumstances that causes a change in judgment about the realizability of the deferred tax asset. This evaluation includes our foreign deferred tax assets which the Company currently believes are more likely than not realizable, but it is reasonably possible that this belief could change in the near term requiring establishment of additional valuation allowances.

The application of the requirements for accounting for income taxes in interim periods, after consideration of our valuation allowance, causes a significant variation in the typical relationship between income tax expense and pretax accounting income. For the second quarter of 2014, our effective income tax rate was an expense of 5.8%. Our tax rate continues to reflect the effect of not recognizing the benefit of current period losses in certain domestic jurisdictions where it is not more likely than not that such benefits would be realized. In addition, the first half of 2014 was negatively impacted by increased foreign taxes in Puerto Rico resulting from a new tax law change which became effective during the second quarter of 2014, as well as a tax settlement, but was partially offset by current period losses attributable to Sears Canada.

NOTE 10 – SUMMARY OF SEGMENT DATA

These reportable segment classifications are based on our business formats, as described in Note 1. The Kmart and Sears Canada formats each represent both an operating and reportable segment. The Sears Domestic reportable segment consists of the aggregation of several business formats. These formats are evaluated by our Chief Operating Decision Maker ("CODM") to make decisions about resource allocation and to assess performance.

Each of these segments derives its revenues from the sale of merchandise and related services to customers, primarily in the United States and Canada. The merchandise and service categories are as follows:

(i) Hardlines—consists of home appliances, consumer electronics, lawn & garden, tools & hardware, automotive parts, household goods, toys, housewares and sporting goods;

(ii) Apparel and Soft Home—includes women's, men's, kids', footwear, jewelry, accessories and soft home;

(iii) Food and Drug—consists of grocery & household, pharmacy and drugstore;

(iv) Service—includes repair, installation and automotive service and extended contract revenue; and

(v) Other—includes revenues earned in connection with our agreements with SHO and Lands' End, as well as credit revenues and licensed business revenues.

18

SEARS HOLDINGS CORPORATION

Notes to Condensed Consolidated Financial Statements — (Continued)

(Unaudited)

	13 Weeks Ended August 2, 2014
millions	Kmart			Sears Domestic			Sears Canada			Sears Holdings
Merchandise sales and services
Hardlines	$	892		$	2,362		$	418		$	3,672
Apparel and Soft Home	935			770			325			2,030
Food and Drug	1,075			2			—			1,077
Service	4			612			26			642
Other	17			564			11			592
Total merchandise sales and services	2,923			4,310			780			8,013
Costs and expenses
Cost of sales, buying and occupancy	2,341			3,334			596			6,271
Selling and administrative	729			1,184			205			2,118
Depreciation and amortization	24			110			18			152
Impairment charges	2			3			15			20
Gain on sales of assets	(31		)	(3		)	—			(34		)
Total costs and expenses	3,065			4,628			834			8,527
Operating loss	$	(142	)	$	(318	)	$	(54	)	$	(514	)
Total assets	$	3,730		$	10,778		$	1,930		$	16,438
Capital expenditures	$	7		$	38		$	9		$	54

	13 Weeks Ended August 3, 2013
millions	Kmart			Sears Domestic			Sears Canada			Sears Holdings
Merchandise sales and services
Hardlines	$	977		$	2,458		$	484		$	3,919
Apparel and Soft Home	1,003			1,120			387			2,510
Food and Drug	1,169			3			—			1,172
Service	4			656			36			696
Other	15			546			13			574
Total merchandise sales and services	3,168			4,783			920			8,871
Costs and expenses
Cost of sales, buying and occupancy	2,459			3,544			682			6,685
Selling and administrative	747			1,301			243			2,291
Depreciation and amortization	33			129			25			187
Gain on sales of assets	(15		)	(45		)	(181		)	(241		)
Total costs and expenses	3,224			4,929			769			8,922
Operating income (loss)	$	(56	)	$	(146	)	$	151		$	(51	)
Total assets	$	4,291		$	12,602		$	2,385		$	19,278
Capital expenditures	$	4		$	47		$	5		$	56

19

SEARS HOLDINGS CORPORATION

Notes to Condensed Consolidated Financial Statements — (Continued)

(Unaudited)

	26 Weeks Ended August 2, 2014
millions	Kmart			Sears Domestic			Sears Canada			Sears Holdings
Merchandise sales and services
Hardlines	$	1,709		$	4,513		$	773		$	6,995
Apparel and Soft Home	1,886			1,792			625			4,303
Food and Drug	2,184			4			—			2,188
Service	8			1,196			57			1,261
Other	33			1,090			22			1,145
Total merchandise sales and services	5,820			8,595			1,477			15,892
Costs and expenses
Cost of sales, buying and occupancy	4,643			6,550			1,129			12,322
Selling and administrative	1,420			2,356			431			4,207
Depreciation and amortization	47			224			36			307
Impairment charges	2			8			15			25
(Gain) loss on sales of assets	(52		)	(29		)	1			(80		)
Total costs and expenses	6,060			9,109			1,612			16,781
Operating loss	$	(240	)	$	(514	)	$	(135	)	$	(889	)
Total assets	$	3,730		$	10,778		$	1,930		$	16,438
Capital expenditures	$	20		$	87		$	19		$	126

	26 Weeks Ended August 3, 2013
millions	Kmart			Sears Domestic			Sears Canada			Sears Holdings
Merchandise sales and services
Hardlines	$	1,875		$	4,641		$	925		$	7,441
Apparel and Soft Home	1,996			2,285			741			5,022
Food and Drug	2,359			6			—			2,365
Service	9			1,271			68			1,348
Other	32			1,087			28			1,147
Total merchandise sales and services	6,271			9,290			1,762			17,323
Costs and expenses
Cost of sales, buying and occupancy	4,857			6,837			1,287			12,981
Selling and administrative	1,460			2,556			493			4,509
Depreciation and amortization	66			262			50			378
Impairment charges	—			8			—			8
Gain on sales of assets	(28		)	(46		)	(181		)	(255		)
Total costs and expenses	6,355			9,617			1,649			17,621
Operating income (loss)	$	(84	)	$	(327	)	$	113		$	(298	)
Total assets	$	4,291		$	12,602		$	2,385		$	19,278
Capital expenditures	$	25		$	76		$	15		$	116

20

SEARS HOLDINGS CORPORATION

Notes to Condensed Consolidated Financial Statements — (Continued)

(Unaudited)

NOTE 11 – SUPPLEMENTAL FINANCIAL INFORMATION

Other long-term liabilities at August 2, 2014, August 3, 2013 and February 1, 2014 consisted of the following:

millions	August 2, 2014		August 3, 2013		February 1, 2014
Unearned revenues	$	836	$	858	$	836
Self-insurance reserves	691		705		686
Other	480		518		486
Total	$	2,007	$	2,081	$	2,008

NOTE 12 – LEGAL PROCEEDINGS

We are a defendant in several lawsuits containing class or collective action allegations in which the plaintiffs are current and former hourly and salaried associates who allege violations of various wage and hour laws, rules and regulations pertaining to alleged misclassification of certain of our employees and the failure to pay overtime and/or the failure to pay for missed meal and rest periods. The complaints generally seek unspecified monetary damages, injunctive relief, or both. Further, certain of these proceedings are in jurisdictions with reputations for aggressive application of laws and procedures against corporate defendants. We also are a defendant in several putative or certified class action lawsuits in California relating to alleged failure to comply with California laws pertaining to certain operational, marketing and payroll practices. The California laws alleged to have been violated in each of these lawsuits provide the potential for significant statutory penalties. At this time, the Company is not able to either predict the outcome of these lawsuits or reasonably estimate a potential range of loss with respect to the lawsuits.

We are subject to various other legal and governmental proceedings and investigations, including some involving the practices and procedures in our more highly regulated businesses and many involving litigation incidental to those and other businesses. Some matters contain class action allegations, environmental and asbestos exposure allegations and other consumer-based, regulatory or qui tam claims, each of which may seek compensatory, punitive or treble damage claims (potentially in large amounts), as well as other types of relief. Additionally, some of these claims or actions, such as the qui-tam claims, have the potential for significant statutory penalties.

In accordance with accounting standards regarding loss contingencies, we accrue an undiscounted liability for those contingencies where the incurrence of a loss is probable and the amount can be reasonably estimated, and we disclose the amount accrued and the amount of a reasonably possible loss in excess of the amount accrued, if such disclosure is necessary for our financial statements to not be misleading. We do not record liabilities when the likelihood that the liability has been incurred is probable but the amount cannot be reasonably estimated, or when the liability is believed to be only reasonably possible or remote.

Because litigation outcomes are inherently unpredictable, our evaluation of legal proceedings often involves a series of complex assessments by management about future events and can rely heavily on estimates and assumptions. If the assessments indicate that loss contingencies that could be material to any one of our financial statements are not probable, but are reasonably possible, or are probable, but cannot be estimated, then we disclose the nature of the loss contingencies, together with an estimate of the range of possible loss or a statement that such loss is not reasonably estimable. While the consequences of certain unresolved proceedings are not presently determinable, and an estimate of the probable and reasonably possible loss or range of loss in excess of amounts accrued for such proceedings cannot be reasonably made, an adverse outcome from such proceedings could have a material effect on our earnings in any given reporting period. However, in the opinion of our management, after consulting with legal counsel, and taking into account insurance and reserves, the ultimate liability related to current outstanding matters is not expected to have a material effect on our financial position, liquidity or capital resources.

NOTE 13 – RECENT ACCOUNTING PRONOUNCEMENTS

Revenue from Contracts with Customers

In May 2014, the Financial Accounting Standards Board (“FASB”) issued an accounting standards update which replaces the current revenue recognition standards. The new revenue recognition standard provides a five-step analysis of transactions to determine when and how revenue is recognized. The core principle is that a company

21

SEARS HOLDINGS CORPORATION

Notes to Condensed Consolidated Financial Statements — (Continued)

(Unaudited)

should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. This update will be effective for the Company in the first quarter of 2017 and may be applied retrospectively for each period presented or as a cumulative-effect adjustment at the date of adoption. The Company is evaluating the effect of adopting this new standard.

Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity

In April 2014, the FASB issued an accounting standards update which modifies the requirements for disposals to qualify as discontinued operations and expands related disclosure requirements. The update will be effective for the Company in the first quarter of 2015, and early adoption of the update is permitted. The adoption of the update may impact whether future disposals qualify as discontinued operations and therefore could impact the Company's financial statement presentation and disclosures.

Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists

In July 2013, the FASB issued an accounting standards update which requires an unrecognized tax benefit to be presented as a reduction to a deferred tax asset for a net operating loss carryforward, a similar tax loss or a tax credit carryforward that the entity intends to use and is available for settlement at the reporting date. The update was effective and adopted by the Company in the first quarter of 2014 and impacted the Company's disclosures, but otherwise did not have a material impact on the Company's condensed consolidated financial position, results of operations or cash flows.

NOTE 14 – RELATED PARTY DISCLOSURE

Investment of Surplus Cash

Our Board has delegated authority to direct investment of our surplus cash to Edward S. Lampert, subject to various limitations that have been or may be from time to time adopted by the Board of Directors and/or the Finance Committee of the Board of Directors. Mr. Lampert is Chairman of our Board of Directors and its Finance Committee and is the Chairman and Chief Executive Officer of ESL. Additionally, on February 1, 2013, Mr. Lampert became our Chief Executive Officer, in addition to his role as Chairman of the Board. Neither Mr. Lampert nor ESL will receive compensation for any such investment activities undertaken on our behalf, other than Mr. Lampert's compensation as our Chief Executive Officer. ESL beneficially owned approximately 48% of our outstanding common stock at August 2, 2014.

Further, to clarify the expectations that the Board of Directors has with respect to the investment of our surplus cash, the Board has renounced, in accordance with Delaware law, any interest or expectancy of the Company associated with any investment opportunities in securities that may come to the attention of Mr. Lampert or any employee, officer, director or advisor to ESL and its affiliated investment entities (each, a “Covered Party”) who also serves as an officer or director of the Company other than (a) investment opportunities that come to such Covered Party’s attention directly and exclusively in such Covered Party’s capacity as a director, officer or employee of the Company, (b) control investments in companies in the mass merchandising, retailing, commercial appliance distribution, product protection agreements, residential and commercial product installation and repair services and automotive repair and maintenance industries and (c) investment opportunities in companies or assets with a significant role in our retailing business, including investment in real estate currently leased by the Company or in suppliers for which the Company is a substantial customer representing over 10% of such companies’ revenues, but excluding investments of ESL that were existing as of May 23, 2005.

Unsecured Commercial Paper

During the first half of 2014 and 2013, ESL and its affiliates held unsecured commercial paper issued by Sears Roebuck Acceptance Corp. (“SRAC”), an indirect wholly owned subsidiary of Sears Holdings. For the commercial paper outstanding to ESL, the weighted average of each of maturity, annual interest rate, and principal amount outstanding was 30.7 days, 2.78% and $25.3 million and 30.6 days, 2.78% and $273 million, respectively, in the first half of 2014 and 2013. The largest aggregate amount of principal outstanding to ESL at any time since the beginning of 2014 was $150 million and $0.4 million interest was paid by SRAC to ESL during the first half of 2014. ESL held

22

SEARS HOLDINGS CORPORATION

Notes to Condensed Consolidated Financial Statements — (Continued)

(Unaudited)

$235 million in principal amount of commercial paper at August 3, 2013, which included $143 million held by Mr. Lampert. Neither ESL nor Mr. Lampert held any of our commercial paper at August 2, 2014 or February 1, 2014. The commercial paper purchases were made in the ordinary course of business on substantially the same terms, including interest rates, as terms prevailing for comparable transactions with other persons, and did not present features unfavorable to the Company.

Senior Secured Notes

At August 2, 2014, Mr. Lampert and ESL held an aggregate of $205 million of principal amount of the Company's 6 5/8% Senior Secured Notes due 2018 (the "6 5/8%" Notes") and $3 million of principal amount of unsecured notes issued by SRAC (the "Subsidiary Notes"). At August 3, 2013 and February 1, 2014, Mr. Lampert and ESL held an aggregate of $95 million of principal amount of 6 5/8% Notes and $3 million of principal amount of Subsidiary Notes.

Trade Receivable Put Agreements

On January 26, 2012, ESL entered into an agreement with a financial institution to acquire from the financial institution an undivided participating interest in a certain percentage of its rights and obligations under trade receivable put agreements that were entered into with certain vendors of the Company. These agreements generally provide that, in the event of a bankruptcy filing by the Company, the financial institution will purchase such vendors’ accounts receivable arising from the sale of goods or services to the Company. ESL may from time to time choose to purchase an 80% undivided participating interest in the rights and obligations primarily arising under future trade receivable put agreements that the financial institution enters into with our vendors during the term of its agreement. The Company is neither a party nor will it become a party to any of these agreements. At February 1, 2014, and August 3, 2013 ESL held a participation interest totaling $80 million and $97 million, respectively, in the financial institution’s agreements relating to the Company. At August 2, 2014, ESL held no participating interest.

Sears Canada

ESL owns approximately 28% of the outstanding common shares of Sears Canada.

Lands' End

ESL owns approximately 49% of the outstanding common stock of Lands’ End (based on publicly available information as of April 8, 2014). Holdings, and certain of its subsidiaries, entered into a transition services agreement in connection with the spin-off pursuant to which Lands’ End and Holdings will provide to each other, on an interim, transitional basis, various services, which may include, but are not limited to, tax services, logistics services, auditing and compliance services, inventory management services, information technology services and continued participation in certain contracts shared with Holdings and its subsidiaries, as well as agreements related to Lands' End Shops at Sears and participation in the Shop Your Way program.

Amounts due to or from Lands’ End are non-interest bearing, and generally settled on a net basis. Holdings invoices Lands’ End on at least a monthly basis. At August 2, 2014, Holdings reported a net amount receivable from Lands' End of $3 million in the Accounts receivable line of the Condensed Consolidated Balance Sheets. Amounts related to revenue from retail services and rent for Lands' End Shops at Sears, participation in the Shop Your Way program, and corporate shared services were $18 million and $24 million, respectively, for the 13- and 26- week periods ended August 2, 2014. The amounts Lands' End earned related to call center services and commissions were $3 million and $4 million, respectively, for the 13- and 26- week periods ended August 2, 2014.

SHO

Holdings, and certain of its subsidiaries, engage in transactions with SHO pursuant to various agreements with SHO which, among other things, (1) govern the principal transactions relating to the rights offering and certain aspects of our relationship with SHO following the separation, (2) establish terms under which Holdings and certain of its subsidiaries will provide SHO with services, and (3) establish terms pursuant to which Holdings and certain of its

23

SEARS HOLDINGS CORPORATION

Notes to Condensed Consolidated Financial Statements — (Continued)

(Unaudited)

subsidiaries will obtain merchandise for SHO. ESL owns approximately 47% of the outstanding common stock of SHO (based on publicly available information as of July 31, 2014).

These agreements were made in the context of a parent-subsidiary relationship and were negotiated in the overall context of the separation. The Company believes that the methods by which costs are allocated are reasonable and are based on prorated estimates of costs expected to be incurred by the Company. A summary of the nature of related party transactions involving SHO is as follows:

• SHO obtains a significant amount of its merchandise from the Company. We have also entered into certain agreements with SHO to provide logistics, handling, warehouse and transportation services. SHO also pays a royalty related to the sale of Kenmore, Craftsman and DieHard products and fees for participation in the SHOP YOUR WAY program.

• SHO receives commissions from the Company for the sale of merchandise made through www.sears.com, extended service agreements, delivery and handling services and credit revenues.

• The Company provides SHO with shared corporate services. These services include accounting and finance, legal, human resources, information technology and real estate.

Amounts due to or from SHO are non-interest bearing, settled on a net basis, and have payment terms of 10 days after the invoice date. The Company invoices SHO on a weekly basis. At August 2, 2014, August 3, 2013 and February 1, 2014, Holdings reported a net amount receivable from SHO of $84 million, $77 million and $68 million, respectively, in the Accounts receivable line of the Condensed Consolidated Balance Sheets. Amounts related to the sale of inventory and related services, royalties, and corporate shared services were $441 million and $854 million, respectively, for the 13- and 26- week periods ended August 2, 2014, and $451 million and $885 million, respectively, for the 13- and 26- week periods ended August 3, 2013. The net amounts SHO earned related to commissions were $27 million and $55 million, respectively, for the 13- and 26- week periods ended August 2, 2014, and $24 million and $63 million, respectively, for the 13- and 26- week periods ended August 3, 2013. Additionally, the Company has guaranteed lease obligations for certain SHO store leases that were assigned as a result of the separation. See Note 4 of our Annual Report on Form 10-K for the fiscal year ended February 1, 2014 for further information related to these guarantees.

Also in connection with the separation, the Company entered into an agreement with SHO and the agent under SHO's secured credit facility, whereby the Company committed to continue to provide services to SHO in connection with a realization on the lender's collateral after default under the secured credit facility, notwithstanding SHO's default under the underlying agreement with us, and to provide certain notices and services to the agent, for so long as any obligations remain outstanding under the secured credit facility.

NOTE 15 – GUARANTOR/NON-GUARANTOR SUBSIDIARY FINANCIAL INFORMATION

At August 2, 2014, the principal amount outstanding of the Company’s 65/8% senior secured notes due 2018 was $1.24 billion. These notes were issued in 2010 by Sears Holdings Corporation (“Parent”). The notes are guaranteed by certain of our 100% owned domestic subsidiaries that own the collateral for the notes, as well as by SRAC (the “guarantor subsidiaries”). The following condensed consolidated financial information presents the Condensed Consolidating Balance Sheets at August 2, 2014, August 3, 2013 and February 1, 2014, the Condensed Consolidating Statements of Operations and the Condensed Consolidating Statements of Comprehensive Income (Loss) for the 13- and 26- week periods ended August 2, 2014 and August 3, 2013, and the Condensed Consolidating Statements of Cash flows for the 13- and 26- week periods ended August 2, 2014 and August 3, 2013 of (i) Parent; (ii) the guarantor subsidiaries; (iii) the non-guarantor subsidiaries; (iv) eliminations and (v) the Company on a consolidated basis.

On April 4, 2014, we completed the separation of our Lands' End business through a spin-off transaction. The following condensed consolidated financial statements had total assets and liabilities of approximately $1.1 billion and $395 million, respectively, at August 3, 2013 and total assets and liabilities of approximately $1.1 billion and $385 million, respectively, at February 1, 2014, attributable to the Lands' End domestic business. Merchandise sales and services included revenues of approximately $185 million from the Lands' End domestic business for the 26- week period ended August 2, 2014, and approximately $280 million and $545 million, respectively, for the 13- and 26- week periods ended August 3, 2013. Net loss attributable to Holdings' shareholders included net income of

24

SEARS HOLDINGS CORPORATION

Notes to Condensed Consolidated Financial Statements — (Continued)

(Unaudited)

approximately $5 million from the Lands' End domestic business for the 26- week period ended August 2, 2014, and approximately $10 million and $15 million, respectively, for the 13- and 26- week periods ended August 3, 2013. The financial information for the domestic portion of Lands' End business is reflected within the guarantor subsidiaries balances for these periods, while the international portion is reflected within the non-guarantor subsidiaries balances for these periods.

The principal elimination entries relate to investments in subsidiaries and intercompany balances and transactions including transactions with our wholly-owned non-guarantor insurance subsidiary. The Company has accounted for investments in subsidiaries under the equity method. The guarantor subsidiaries are 100% owned directly or indirectly by the Parent and all guarantees are joint, several and unconditional. Additionally, the notes are secured by a security interest in certain assets consisting primarily of domestic inventory and credit card receivables of the guarantor subsidiaries, and consequently may not be available to satisfy the claims of the Company’s general creditors. Certain investments primarily held by non-guarantor subsidiaries are recorded by the issuers at historical cost and are recorded at fair value by the holder.

25

SEARS HOLDINGS CORPORATION

Notes to Condensed Consolidated Financial Statements — (Continued)

(Unaudited)

Condensed Consolidating Balance Sheet

August 2, 2014

millions	Parent		Guarantor Subsidiaries		Non- Guarantor Subsidiaries		Eliminations			Consolidated
Current assets
Cash and cash equivalents	$	—	$	565	$	264	$	—		$	829
Intercompany receivables	—		—		26,369		(26,369		)	—
Accounts receivable	—		397		119		—			516
Merchandise inventories	—		5,783		600		—			6,383
Prepaid expenses and other current assets	43		971		451		(1,036		)	429
Total current assets	43		7,716		27,803		(27,405		)	8,157
Total property and equipment, net	—		3,680		1,411		—			5,091
Goodwill and intangible assets	—		288		2,283		—			2,571
Other assets	12		427		2,742		(2,562		)	619
Investment in subsidiaries	13,638		25,474		—		(39,112		)	—
TOTAL ASSETS	$	13,693	$	37,585	$	34,239	$	(69,079	)	$	16,438
Current liabilities
Short-term borrowings	$	—	$	1,404	$	—	$	—		$	1,404
Current portion of long-term debt and capitalized lease obligations	—		72		13		—			85
Merchandise payables	—		2,239		267		—			2,506
Intercompany payables	12,112		14,257		—		(26,369		)	—
Short-term deferred tax liabilities	2		504		—		(22		)	484
Other current liabilities	25		2,362		2,325		(1,013		)	3,699
Total current liabilities	12,139		20,838		2,605		(27,404		)	8,178
Long-term debt and capitalized lease obligations	1,238		3,805		70		(2,298		)	2,815
Pension and postretirement benefits	—		1,480		241		—			1,721
Long-term deferred tax liabilities	—		—		1,006		(208		)	798
Other long-term liabilities	—		794		1,466		(253		)	2,007
Total Liabilities	13,377		26,917		5,388		(30,163		)	15,519
EQUITY
Shareholder’s equity	316		10,668		28,851		(39,323		)	512
Noncontrolling interest	—		—		—		407			407
Total Equity	316		10,668		28,851		(38,916		)	919
TOTAL LIABILITIES AND EQUITY	$	13,693	$	37,585	$	34,239	$	(69,079	)	$	16,438

26

SEARS HOLDINGS CORPORATION

Notes to Condensed Consolidated Financial Statements — (Continued)

(Unaudited)

Condensed Consolidating Balance Sheet

August 3, 2013

millions	Parent		Guarantor Subsidiaries		Non- Guarantor Subsidiaries		Eliminations			Consolidated
Current assets
Cash and cash equivalents	$	—	$	336	$	335	$	—		$	671
Intercompany receivables	—		—		26,087		(26,087		)	—
Accounts receivable	—		530		111		—			641
Merchandise inventories	—		6,856		852		—			7,708
Prepaid expenses and other current assets	92		1,093		470		(1,175		)	480
Total current assets	92		8,815		27,855		(27,262		)	9,500
Total property and equipment, net	—		4,241		1,545		—			5,786
Goodwill and intangible assets	—		955		2,288		—			3,243
Other assets	15		227		2,905		(2,398		)	749
Investment in subsidiaries	15,822		25,301		—		(41,123		)	—
TOTAL ASSETS	$	15,929	$	39,539	$	34,593	$	(70,783	)	$	19,278
Current liabilities
Short-term borrowings	$	—	$	1,756	$	—	$	—		$	1,756
Current portion of long-term debt and capitalized lease obligations	—		60		15		—			75
Merchandise payables	—		2,530		373		—			2,903
Intercompany payables	12,442		13,645		—		(26,087		)	—
Short-term deferred tax liabilities	3		412		—		(33		)	382
Other current liabilities	26		2,405		2,555		(1,142		)	3,844
Total current liabilities	12,471		20,808		2,943		(27,262		)	8,960
Long-term debt and capitalized lease obligations	1,237		2,923		101		(2,350		)	1,911
Pension and postretirement benefits	—		2,150		389		—			2,539
Long-term deferred tax liabilities	—		8		889		66			963
Other long-term liabilities	—		826		1,508		(253		)	2,081
Total Liabilities	13,708		26,715		5,830		(29,799		)	16,454
EQUITY
Shareholder’s equity	2,221		12,824		28,763		(41,448		)	2,360
Noncontrolling interest	—		—		—		464			464
Total Equity	2,221		12,824		28,763		(40,984		)	2,824
TOTAL LIABILITIES AND EQUITY	$	15,929	$	39,539	$	34,593	$	(70,783	)	$	19,278

27

SEARS HOLDINGS CORPORATION

Notes to Condensed Consolidated Financial Statements — (Continued)

(Unaudited)

Condensed Consolidating Balance Sheet

February 1, 2014

millions	Parent		Guarantor Subsidiaries		Non- Guarantor Subsidiaries		Eliminations			Consolidated
Current assets
Cash and cash equivalents	$	—	$	537	$	491	$	—		$	1,028
Intercompany receivables	—		—		25,884		(25,884		)	—
Accounts receivable	—		425		128		—			553
Merchandise inventories	—		6,356		678		—			7,034
Prepaid expenses and other current assets	44		873		375		(948		)	344
Total current assets	44		8,191		27,556		(26,832		)	8,959
Total property and equipment, net	—		3,906		1,488		—			5,394
Goodwill and intangible assets	—		944		2,285		—			3,229
Other assets	13		240		2,603		(2,177		)	679
Investment in subsidiaries	14,743		25,303		—		(40,046		)	—
TOTAL ASSETS	$	14,800	$	38,584	$	33,932	$	(69,055	)	$	18,261
Current liabilities
Short-term borrowings	$	—	$	1,332	$	—	$	—		$	1,332
Current portion of long-term debt and capitalized lease obligations	—		70		13		—			83
Merchandise payables	—		2,213		283		—			2,496
Intercompany payables	12,103		13,781		—		(25,884		)	—
Short-term deferred tax liabilities	2		408		—		(23		)	387
Other current liabilities	26		2,412		2,374		(925		)	3,887
Total current liabilities	12,131		20,216		2,670		(26,832		)	8,185
Long-term debt and capitalized lease obligations	1,238		3,781		76		(2,261		)	2,834
Pension and postretirement benefits	—		1,681		261		—			1,942
Long-term deferred tax liabilities	—		128		955		26			1,109
Other long-term liabilities	—		805		1,453		(250		)	2,008
Total Liabilities	13,369		26,611		5,415		(29,317		)	16,078
EQUITY
Shareholder’s equity	1,431		11,973		28,517		(40,182		)	1,739
Noncontrolling interest	—		—		—		444			444
Total Equity	1,431		11,973		28,517		(39,738		)	2,183
TOTAL LIABILITIES AND EQUITY	$	14,800	$	38,584	$	33,932	$	(69,055	)	$	18,261

28

SEARS HOLDINGS CORPORATION

Notes to Condensed Consolidated Financial Statements — (Continued)

(Unaudited)

Condensed Consolidating Statement of Operations

For the 13 Weeks Ended August 2, 2014

millions	Parent			Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Eliminations			Consolidated
Merchandise sales and services	$	—		$	7,315		$	1,530		$	(832	)	$	8,013
Cost of sales, buying and occupancy	—			5,793			903			(425		)	6,271
Selling and administrative	1			2,079			445			(407		)	2,118
Depreciation and amortization	—			115			37			—			152
Impairment charges	—			5			15			—			20
Gain on sales of assets	—			(34		)	—			—			(34		)
Total costs and expenses	1			7,958			1,400			(832		)	8,527
Operating income (loss)	(1		)	(643		)	130			—			(514		)
Interest expense	(53		)	(111		)	(52		)	144			(72		)
Interest and investment income	—			9			167			(144		)	32
Other income	—			—			5			—			5
Income (loss) before income taxes	(54		)	(745		)	250			—			(549		)
Income tax (expense) benefit	—			1			(33		)	—			(32		)
Equity (deficit) in earnings in subsidiaries	(527		)	125			—			402			—
Net income (loss)	(581		)	(619		)	217			402			(581		)
Loss attributable to noncontrolling interests	—			—			—			8			8
NET INCOME (LOSS) ATTRIBUTABLE TO HOLDINGS’ SHAREHOLDERS	$	(581	)	$	(619	)	$	217		$	410		$	(573	)

29

SEARS HOLDINGS CORPORATION

Notes to Condensed Consolidated Financial Statements — (Continued)

(Unaudited)

Condensed Consolidating Statement of Operations

For the 13 Weeks Ended August 3, 2013

millions	Parent			Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Eliminations			Consolidated
Merchandise sales and services	$	—		$	8,030		$	1,780		$	(939	)	$	8,871
Cost of sales, buying and occupancy	—			6,121			1,037			(473		)	6,685
Selling and administrative	1			2,219			537			(466		)	2,291
Depreciation and amortization	—			142			45			—			187
Gain on sales of assets	—			(60		)	(181		)	—			(241		)
Total costs and expenses	1			8,422			1,438			(939		)	8,922
Operating income (loss)	(1		)	(392		)	342			—			(51		)
Interest expense	(55		)	(90		)	(22		)	108			(59		)
Interest and investment income	—			10			112			(108		)	14
Other loss	—			—			(1		)	—			(1		)
Income (loss) before income taxes	(56		)	(472		)	431			—			(97		)
Income tax (expense) benefit	—			37			(67		)	—			(30		)
Equity (deficit) in earnings in subsidiaries	(71		)	281			—			(210		)	—
Net income (loss)	(127		)	(154		)	364			(210		)	(127		)
Income attributable to noncontrolling interests	—			—			—			(67		)	(67		)
NET INCOME (LOSS) ATTRIBUTABLE TO HOLDINGS’ SHAREHOLDERS	$	(127	)	$	(154	)	$	364		$	(277	)	$	(194	)

30

SEARS HOLDINGS CORPORATION

Notes to Condensed Consolidated Financial Statements — (Continued)

(Unaudited)

Condensed Consolidating Statement of Operations

For the 26 Weeks Ended August 2, 2014

millions	Parent			Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Eliminations			Consolidated
Merchandise sales and services	$	—		$	14,516		$	3,052		$	(1,676	)	$	15,892
Cost of sales, buying and occupancy	—			11,407			1,760			(845		)	12,322
Selling and administrative	1			4,070			967			(831		)	4,207
Depreciation and amortization	—			231			76			—			307
Impairment charges	—			10			15			—			25
Gain on sales of assets	—			(67		)	(13		)	—			(80		)
Total costs and expenses	1			15,651			2,805			(1,676		)	16,781
Operating income (loss)	(1		)	(1,135		)	247			—			(889		)
Interest expense	(104		)	(221		)	(47		)	229			(143		)
Interest and investment income	—			18			247			(229		)	36
Other income	—			—			2			—			2
Income (loss) before income taxes	(105		)	(1,338		)	449			—			(994		)
Income tax (expense) benefit	—			47			(76		)	—			(29		)
Equity (deficit) in earnings in subsidiaries	(918		)	174			—			744			—
Net income (loss)	(1,023		)	(1,117		)	373			744			(1,023		)
Loss attributable to noncontrolling interests	—			—			—			48			48
NET INCOME (LOSS) ATTRIBUTABLE TO HOLDINGS’ SHAREHOLDERS	$	(1,023	)	$	(1,117	)	$	373		$	792		$	(975	)

31

SEARS HOLDINGS CORPORATION

Notes to Condensed Consolidated Financial Statements — (Continued)

(Unaudited)

Condensed Consolidating Statement of Operations

For the 26 Weeks Ended August 3, 2013

millions	Parent			Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Eliminations			Consolidated
Merchandise sales and services	$	—		$	15,608		$	3,475		$	(1,760	)	$	17,323
Cost of sales, buying and occupancy	—			11,888			1,949			(856		)	12,981
Selling and administrative	1			4,306			1,106			(904		)	4,509
Depreciation and amortization	—			286			92			—			378
Impairment charges	—			8			—			—			8
Gain on sales of assets	—			(74		)	(181		)	—			(255		)
Total costs and expenses	1			16,414			2,966			(1,760		)	17,621
Operating income (loss)	(1		)	(806		)	509			—			(298		)
Interest expense	(110		)	(184		)	(48		)	222			(120		)
Interest and investment income	—			19			224			(222		)	21
Other loss	—			—			(1		)	—			(1		)
Income (loss) before income taxes	(111		)	(971		)	684			—			(398		)
Income tax (expense) benefit	—			86			(107		)	—			(21		)
Equity (deficit) in earnings in subsidiaries	(308		)	408			—			(100		)	—
Net income (loss)	(419		)	(477		)	577			(100		)	(419		)
Income attributable to noncontrolling interests	—			—			—			(54		)	(54		)
NET INCOME (LOSS) ATTRIBUTABLE TO HOLDINGS’ SHAREHOLDERS	$	(419	)	$	(477	)	$	577		$	(154	)	$	(473	)

32

SEARS HOLDINGS CORPORATION

Notes to Condensed Consolidated Financial Statements — (Continued)

(Unaudited)

Condensed Consolidating Statement of Comprehensive Income (Loss)

For the 13 Weeks Ended August 2, 2014

millions	Parent			Guarantor Subsidiaries			Non- Guarantor Subsidiaries		Eliminations			Consolidated
Net income (loss)	$	(581	)	$	(619	)	$	217	$	402		$	(581	)
Other comprehensive income (loss)
Pension and postretirement adjustments, net of tax	—			29			6		—			35
Deferred loss on derivatives, net of tax	(1		)	—			—		—			(1		)
Currency translation adjustments, net of tax	(1		)	—			4		—			3
Unrealized net gain, net of tax	—			—			161		(161		)	—
Total other comprehensive income (loss)	(2		)	29			171		(161		)	37
Comprehensive income (loss)	(583		)	(590		)	388		241			(544		)
Comprehensive loss attributable to noncontrolling interests	—			—			—		3			3
Comprehensive income (loss) attributable to Holdings’ shareholders	$	(583	)	$	(590	)	$	388	$	244		$	(541	)

33

SEARS HOLDINGS CORPORATION

Notes to Condensed Consolidated Financial Statements — (Continued)

(Unaudited)

Condensed Consolidating Statement of Comprehensive Income (Loss)

For the 13 Weeks Ended August 3, 2013

millions	Parent			Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Eliminations			Consolidated
Net income (loss)	$	(127	)	$	(154	)	$	364		$	(210	)	$	(127	)
Other comprehensive income (loss)
Pension and postretirement adjustments, net of tax	—			42			6			—			48
Currency translation adjustments, net of tax	—			—			(20		)	—			(20		)
Unrealized net loss, net of tax	—			(3		)	(100		)	103			—
Total other comprehensive income (loss)	—			39			(114		)	103			28
Comprehensive income (loss)	(127		)	(115		)	250			(107		)	(99		)
Comprehensive income attributable to noncontrolling interests	—			—			—			(61		)	(61		)
Comprehensive income (loss) attributable to Holdings’ shareholders	$	(127	)	$	(115	)	$	250		$	(168	)	$	(160	)

34

SEARS HOLDINGS CORPORATION

Notes to Condensed Consolidated Financial Statements — (Continued)

(Unaudited)

Condensed Consolidating Statement of Comprehensive Income (Loss)

For the 26 Weeks Ended August 2, 2014

millions	Parent			Guarantor Subsidiaries			Non- Guarantor Subsidiaries		Eliminations			Consolidated
Net income (loss)	$	(1,023	)	$	(1,117	)	$	373	$	744		$	(1,023	)
Other comprehensive income (loss)
Pension and postretirement adjustments, net of tax	—			57			8		—			65
Deferred loss on derivatives, net of tax	(2		)	—			—		—			(2		)
Currency translation adjustments, net of tax	—			—			14		—			14
Unrealized net gain, net of tax	—			—			112		(112		)	—
Total other comprehensive income (loss)	(2		)	57			134		(112		)	77
Comprehensive income (loss)	(1,025		)	(1,060		)	507		632			(946		)
Comprehensive loss attributable to noncontrolling interests	—			—			—		37			37
Comprehensive income (loss) attributable to Holdings’ shareholders	$	(1,025	)	$	(1,060	)	$	507	$	669		$	(909	)

35

SEARS HOLDINGS CORPORATION

Notes to Condensed Consolidated Financial Statements — (Continued)

(Unaudited)

Condensed Consolidating Statement of Comprehensive Income (Loss)

For the 26 Weeks Ended August 3, 2013

millions	Parent			Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Eliminations			Consolidated
Net income (loss)	$	(419	)	$	(477	)	$	577		$	(100	)	$	(419	)
Other comprehensive income (loss)
Pension and postretirement adjustments, net of tax	—			84			10			—			94
Currency translation adjustments, net of tax	—			—			(27		)	—			(27		)
Unrealized net loss, net of tax	—			(2		)	(44		)	46			—
Total other comprehensive income (loss)	—			82			(61		)	46			67
Comprehensive income (loss)	(419		)	(395		)	516			(54		)	(352		)
Comprehensive income attributable to noncontrolling interests	—			—			—			(47		)	(47		)
Comprehensive income (loss) attributable to Holdings’ shareholders	$	(419	)	$	(395	)	$	516		$	(101	)	$	(399	)

36

SEARS HOLDINGS CORPORATION

Notes to Condensed Consolidated Financial Statements — (Continued)

(Unaudited)

Condensed Consolidating Statement of Cash Flows

For the 26 Weeks Ended August 2, 2014

millions	Parent			Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Eliminations			Consolidated
Net cash provided by (used in) operating activities	$	92		$	(1,029	)	$	290		$	(100	)	$	(747	)
Proceeds from sales of property and investments	—			133			31			—			164
Purchases of property and equipment	—			(107		)	(19		)	—			(126		)
Net investing with Affiliates	(92		)	—			(429		)	521			—
Net cash provided by (used in) investing activities	(92		)	26			(417		)	521			38
Repayments of long-term debt	—			(35		)	(7		)	—			(42		)
Increase in short-term borrowings, primarily 90 days or less	—			72			—			—			72
Lands' End, Inc. pre-separation funding	—			515			—			—			515
Separation of Lands' End, Inc.	—			(31		)	—			—			(31		)
Debt issuance costs	—			(11		)	—			—			(11		)
Intercompany dividend	—			—			(100		)	100			—
Net borrowing with Affiliates	—			521			—			(521		)	—
Net cash provided by (used in) financing activities	—			1,031			(107		)	(421		)	503
Effect of exchange rate changes on cash and cash equivalents	—			—			7			—			7
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS	—			28			(227		)	—			(199		)
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR	—			537			491			—			1,028
CASH AND CASH EQUIVALENTS, END OF PERIOD	$	—		$	565		$	264		$	—		$	829

37

SEARS HOLDINGS CORPORATION

Notes to Condensed Consolidated Financial Statements — (Continued)

(Unaudited)

Condensed Consolidating Statement of Cash Flows

For the 26 Weeks Ended August 3, 2013

millions	Parent			Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Eliminations			Consolidated
Net cash provided by (used in) operating activities	$	—		$	(1,213	)	$	498		$	—		$	(715	)
Proceeds from sales of property and investments	—			100			187			—			287
Net increase in investments and restricted cash	—			—			(1		)	—			(1		)
Purchases of property and equipment	—			(101		)	(15		)	—			(116		)
Net investing with Affiliates	—			—			45			(45		)	—
Net cash provided by (used in) investing activities	—			(1		)	216			(45		)	170
Proceeds from debt issuances	—			—			2			—			2
Repayments of long-term debt	—			(39		)	(7		)	—			(46		)
Increase in short-term borrowings, primarily 90 days or less	—			662			—			—			662
Intercompany dividend	257			21			(278		)	—			—
Net borrowing with Affiliates	(257		)	586			(374		)	45			—
Net cash provided by (used in) financing activities	—			1,230			(657		)	45			618
Effect of exchange rate changes on cash and cash equivalents	—			—			(11		)	—			(11		)
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS	—			16			46			—			62
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR	—			320			289			—			609
CASH AND CASH EQUIVALENTS, END OF PERIOD	$	—		$	336		$	335		$	—		$	671

38

SEARS HOLDINGS CORPORATION

13 and 26 Weeks Ended August 2, 2014 and August 3, 2013

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

The following discussion should be read in conjunction with Part II, Item 7 of our Annual Report on Form 10-K for the year ended February 1, 2014.

OVERVIEW OF HOLDINGS

Holdings, the parent company of Kmart and Sears, was formed in connection with the March 24, 2005 Merger of these two companies. We are an integrated retailer with significant physical and intangible assets, as well as virtual capabilities enabled through technology. We currently operate a national network of stores with 1,870 full-line and specialty retail stores in the United States, operating through Kmart and Sears, and 432 full-line and specialty retail stores in Canada operating through Sears Canada Inc. ("Sears Canada"), a 51%-owned subsidiary. Further, we operate a number of websites under the Sears.com and Kmart.com banners which offer more than 125 million products and provide the capability for our members and customers to engage in cross-channel transactions such as free store pickup; buy in store/ship to home; and buy online, return in store. We are also the home of Shop Your Way^SM, a free member-based social shopping platform that offers rewards, personalized services and a unique experience. Shop Your Way connects all of the ways members shop - in store, at home, online and by phone.

We currently conduct our operations in three business segments: Kmart, Sears Domestic and Sears Canada. The nature of operations conducted within each of these segments is discussed within the "Business Segments" section of Part I, Item 1 of our Annual Report on Form 10-K for the year ended February 1, 2014.

On April 4, 2014, we completed the separation of our Lands' End business through a spin-off transaction. The separation was structured to be tax free to our U.S. shareholders for U.S. federal income tax purposes. Prior to the separation, Lands' End, Inc. ("Lands' End") entered into an asset-based senior secured revolving credit facility, which provides for maximum borrowings of approximately $175 million with a letter of credit sub-limit, and a senior secured term loan facility of approximately $515 million. The proceeds of the term loan facility were used to fund a $500 million dividend to Holdings and pay fees and expenses associated with the foregoing facilities. We accounted for this spin-off in accordance with accounting standards applicable to spin-off transactions. Accordingly, we classified the carrying value of net assets contributed to Lands' End as a reduction of capital in excess of par value in the Condensed Consolidated Statement of Equity for the period ended August 2, 2014.

Additionally, as a result of Mr. Lampert's role as our Chairman and Chief Executive Officer, and Chairman and Chief Executive Officer of ESL Investments, Inc. (together with its affiliated funds, "ESL"), and the continuing arrangements between Holdings and Lands' End (as further described in Note 14 of the Notes to Condensed Consolidated Financial Statements), Holdings has determined that it has significant influence over Lands' End. Accordingly, the operating results for Lands' End through the date of the spin-off are presented within the consolidated continuing operations of Holdings and the Sears Domestic segment in the accompanying Condensed Consolidated Financial Statements.

In connection with the separation, Holdings and certain of its subsidiaries entered into various agreements with Lands' End under the terms described in Note 14 of the Notes to Condensed Consolidated Financial Statements.

39

SEARS HOLDINGS CORPORATION

13 and 26 Weeks Ended August 2, 2014 and August 3, 2013

CONSOLIDATED RESULTS OF OPERATIONS

	13 Weeks Ended						26 Weeks Ended
millions, except per share data	August 2, 2014			August 3, 2013			August 2, 2014			August 3, 2013
REVENUES
Merchandise sales and services	$	8,013		$	8,871		$	15,892		$	17,323
COSTS AND EXPENSES
Cost of sales, buying and occupancy	6,271			6,685			12,322			12,981
Gross margin dollars	1,742			2,186			3,570			4,342
Gross margin rate	21.7		%	24.6		%	22.5		%	25.1		%
Selling and administrative	2,118			2,291			4,207			4,509
Selling and administrative expense as a percentage of total revenues	26.4		%	25.8		%	26.5		%	26.0		%
Depreciation and amortization	152			187			307			378
Impairment charges	20			—			25			8
Gain on sales of assets	(34		)	(241		)	(80		)	(255		)
Total costs and expenses	8,527			8,922			16,781			17,621
Operating loss	(514		)	(51		)	(889		)	(298		)
Interest expense	(72		)	(59		)	(143		)	(120		)
Interest and investment income	32			14			36			21
Other income (loss)	5			(1		)	2			(1		)
Loss before income taxes	(549		)	(97		)	(994		)	(398		)
Income tax expense	(32		)	(30		)	(29		)	(21		)
Net loss	(581		)	(127		)	(1,023		)	(419		)
(Income) loss attributable to noncontrolling interests	8			(67		)	48			(54		)
NET LOSS ATTRIBUTABLE TO HOLDINGS' SHAREHOLDERS	$	(573	)	$	(194	)	$	(975	)	$	(473	)
NET LOSS PER COMMON SHARE ATTRIBUTABLE TO HOLDINGS' SHAREHOLDERS
Basic loss per share	$	(5.39	)	$	(1.83	)	$	(9.17	)	$	(4.46	)
Diluted loss per share	$	(5.39	)	$	(1.83	)	$	(9.17	)	$	(4.46	)
Basic weighted average common shares outstanding	106.3			106.1			106.3			106.1
Diluted weighted average common shares outstanding	106.3			106.1			106.3			106.1

40

SEARS HOLDINGS CORPORATION

13 and 26 Weeks Ended August 2, 2014 and August 3, 2013

References to comparable store sales amounts within the following discussion include sales for all stores operating for a period of at least 12 full months, including remodeled and expanded stores, but excluding store relocations and stores that have undergone format changes. Domestic comparable store sales amounts include sales from sears.com and kmart.com shipped directly to customers. These online sales resulted in a benefit to domestic comparable store sales of approximately 160 basis points and 180 basis points, respectively, for the 13- and 26- week periods ended August 2, 2014, and approximately 75 basis points and 80 basis points, respectively, for the 13- and 26- week periods ended August 3, 2013. In addition, domestic comparable store sales have been adjusted for the change in the unshipped sales reserves recorded at the end of each reporting period, which resulted in a negative impact of approximately 30 basis points for both the 13- and 26- week periods ended August 2, 2014, and approximately 60 basis points for the 13-week period ended August 3, 2013, and a benefit of approximately 10 basis points for the 26-week period ended August 3, 2013.

Net Loss Attributable to Holdings' Shareholders, Adjusted EBITDA and Adjusted Loss per Share

We recorded a net loss attributable to Holdings' shareholders for the second quarter of $573 million, or $5.39 loss per diluted share, and $194 million, or $1.83 loss per diluted share, for 2014 and 2013, respectively. We recorded a net loss attributable to Holdings' shareholders of $975 million, or $9.17 loss per diluted share, and $473 million, or $4.46 loss per diluted share, for the first half of 2014 and 2013, respectively.

In addition to our net loss determined in accordance with GAAP, for purposes of evaluating operating performance, we use an Adjusted Earnings Before Interest, Taxes, Depreciation and Amortization ("Adjusted EBITDA") measurement as well as Adjusted Earnings per Share ("Adjusted EPS").

Adjusted EBITDA is computed as net loss attributable to Sears Holdings Corporation appearing on the Condensed Consolidated Statements of Operations excluding (income) loss attributable to noncontrolling interests, income tax expense, interest expense, interest and investment income, other income (loss), depreciation and amortization and gain on sales of assets. In addition, it is adjusted to exclude certain significant items as set forth below. Our management uses Adjusted EBITDA to evaluate the operating performance of our businesses, as well as executive compensation metrics, for comparable periods. Adjusted EBITDA should not be used by investors or other third parties as the sole basis for formulating investment decisions as it excludes a number of important cash and non-cash recurring items.

While Adjusted EBITDA is a non-GAAP measurement, management believes that it is an important indicator of operating performance because:

• EBITDA excludes the effects of financings and investing activities by eliminating the effects of interest and depreciation costs;

• Management considers gains/(losses) on the sale of assets to result from investing decisions rather than ongoing operations; and

• Other significant items, while periodically affecting our results, may vary significantly from period to period and have a disproportionate effect in a given period, which affects comparability of results. Adjustments to EBITDA include impairment charges related to fixed assets and intangible assets, closed store and severance charges, domestic pension expense and the Lands' End separation. We have adjusted our results for these items to make our statements more comparable and therefore more useful to investors as the items are not representative of our ongoing operations and reflect past investment decisions.

41

SEARS HOLDINGS CORPORATION

13 and 26 Weeks Ended August 2, 2014 and August 3, 2013

Adjusted EBITDA was determined as follows:

	13 Weeks Ended						26 Weeks Ended
millions	August 2, 2014			August 3, 2013			August 2, 2014			August 3, 2013
Net loss attributable to SHC per statement of operations	$	(573	)	$	(194	)	$	(975	)	$	(473	)
Income (loss) attributable to noncontrolling interests	(8		)	67			(48		)	54
Income tax expense	32			30			29			21
Interest expense	72			59			143			120
Interest and investment income	(32		)	(14		)	(36		)	(21		)
Other (income) loss	(5		)	1			(2		)	1
Operating loss	(514		)	(51		)	(889		)	(298		)
Depreciation and amortization	152			187			307			378
Gain on sales of assets	(34		)	(241		)	(80		)	(255		)
Before excluded items	(396		)	(105		)	(662		)	(175		)
Closed store reserve and severance	40			10			68			23
Domestic pension expense	23			40			45			81
Impairment charges	20			—			25			8
Adjusted EBITDA	(313		)	(55		)	(524		)	(63		)
Lands' End separation	—			(23		)	(10		)	(41		)
Adjusted EBITDA as defined(1)	$	(313	)	$	(78	)	$	(534	)	$	(104	)
% to revenues(2)	(3.9		)%	(0.9		)%	(3.4		)%	(0.6		)%

⁽¹⁾ Adjusted to reflect the results of the Lands' End business that were included in our results of operations prior to the separation.

⁽²⁾ Excludes revenues of the Lands' End business that were included in our results of operations prior to the separation.

42

SEARS HOLDINGS CORPORATION

13 and 26 Weeks Ended August 2, 2014 and August 3, 2013

Adjusted EBITDA for our segments was as follows:

	13 Weeks Ended
	August 2, 2014												August 3, 2013
millions	Kmart			Sears Domestic			Sears Canada			Sears Holdings			Kmart			Sears Domestic			Sears Canada			Sears Holdings
Operating income (loss) per statement of operations	$	(142	)	$	(318	)	$	(54	)	$	(514	)	$	(56	)	$	(146	)	$	151		$	(51	)
Depreciation and amortization	24			110			18			152			33			129			25			187
Gain on sales of assets	(31		)	(3		)	—			(34		)	(15		)	(45		)	(181		)	(241		)
Before excluded items	(149		)	(211		)	(36		)	(396		)	(38		)	(62		)	(5		)	(105		)
Closed store reserve and severance	27			7			6			40			8			2			—			10
Domestic pension expense	—			23			—			23			—			40			—			40
Impairment charges	2			3			15			20			—			—			—			—
Adjusted EBITDA	(120		)	(178		)	(15		)	(313		)	(30		)	(20		)	(5		)	(55		)
Lands' End separation	—			—			—			—			—			(23		)	—			(23		)
Adjusted EBITDA as defined(1)	$	(120	)	$	(178	)	$	(15	)	$	(313	)	$	(30	)	$	(43	)	$	(5	)	$	(78	)
% to revenues(2)	(4.1		)%	(4.1		)%	(1.9		)%	(3.9		)%	(0.9		)%	(1.0		)%	(0.5		)%	(0.9		)%

	26 Weeks Ended
	August 2, 2014												August 3, 2013
millions	Kmart			Sears Domestic			Sears Canada			Sears Holdings			Kmart			Sears Domestic			Sears Canada			Sears Holdings
Operating income (loss) per statement of operations	$	(240	)	$	(514	)	$	(135	)	$	(889	)	$	(84	)	$	(327	)	$	113		$	(298	)
Depreciation and amortization	47			224			36			307			66			262			50			378
(Gain) loss on sales of assets	(52		)	(29		)	1			(80		)	(28		)	(46		)	(181		)	(255		)
Before excluded items	(245		)	(319		)	(98		)	(662		)	(46		)	(111		)	(18		)	(175		)
Closed store reserve and severance	36			7			25			68			16			5			2			23
Domestic pension expense	—			45			—			45			—			81			—			81
Impairment charges	2			8			15			25			—			8			—			8
Adjusted EBITDA	(207		)	(259		)	(58		)	(524		)	(30		)	(17		)	(16		)	(63		)
Lands' End separation	—			(10		)	—			(10		)	—			(41		)	—			(41		)
Adjusted EBITDA as defined(1)	$	(207	)	$	(269	)	$	(58	)	$	(534	)	$	(30	)	$	(58	)	$	(16	)	$	(104	)
% to revenues(2)	(3.6		)%	(3.2		)%	(3.9		)%	(3.4		)%	(0.5		)%	(0.7		)%	(0.9		)%	(0.6		)%

⁽¹⁾ Adjusted to reflect the results of the Lands' End business that were included in our results of operations prior to the separation.

⁽²⁾ Excludes revenues of the Lands' End business that were included in our results of operations prior to the separation.

43

SEARS HOLDINGS CORPORATION

13 and 26 Weeks Ended August 2, 2014 and August 3, 2013

These other significant items included in Adjusted EBITDA are further explained as follows:

• Impairment charges – Accounting standards require the Company to evaluate the carrying value of fixed assets, goodwill and intangible assets for impairment. As a result of the Company’s analysis, we have recorded impairment charges related to certain fixed asset balances.

• Closed store reserve and severance – We are transforming our Company to a less asset-intensive business model. Throughout this transformation, we continue to make choices related to our stores, which could result in sales, closures, lease terminations or a variety of other decisions.

• Domestic pension expense – Contributions to our pension plans remain a significant use of our cash on an annual basis. Cash contributions to our pension and postretirement plans are separately disclosed on the cash flow statement. While the Company's pension plan is frozen, and thus associates do not currently earn pension benefits, we have a legacy pension obligation for past service performed by Kmart and Sears associates. The annual pension expense included in our statement of operations related to these legacy domestic pension plans was relatively minimal in years prior to 2009. However, due to the severe decline in the capital markets that occurred in the latter part of 2008, our domestic pension expense was $162 million in 2013, $165 million in 2012 and $74 million in 2011. Pension expense is comprised of interest cost, expected return on plan assets and amortization of experience losses. This adjustment eliminates the entire pension expense from the statement of operations to improve comparability. Pension expense is included in the determination of Net Income. The components of the adjustments to EBITDA related to domestic pension expense were as follows:

	13 Weeks Ended						26 Weeks Ended
millions	August 2, 2014			August 3, 2013			August 2, 2014			August 3, 2013
Components of net periodic expense:
Interest cost	$	56		$	55		$	111		$	109
Expected return on plan assets	(61		)	(57		)	(123		)	(112		)
Amortization of experience losses	28			42			57			84
Net periodic expense	$	23		$	40		$	45		$	81

In accordance with U.S. GAAP, we recognize on the balance sheet actuarial gains and losses for defined benefit pension plans annually in the fourth quarter of each fiscal year and whenever a plan is determined to qualify for a remeasurement during a fiscal year. For income statement purposes, these actuarial gains and losses are recognized throughout the year through an amortization process. The Company recognizes in its results of operations, as a corridor adjustment, any unrecognized actuarial net gains or losses that exceed 10% of the larger of projected benefit obligations or plan assets. Accumulated gains/losses that are inside the 10% corridor are not recognized, while accumulated actuarial gains/losses that are outside the 10% corridor are amortized over the "average future service" of the population and are included in the amortization of experience losses line item above.

Actuarial gains and losses occur when actual experience differs from the estimates used to allocate the change in value of pension plans to expense throughout the year or when assumptions change, as they may each year. Significant factors that can contribute to the recognition of actuarial gains and losses include changes in discount rates used to remeasure pension obligations on an annual basis or upon a qualifying remeasurement, differences between actual and expected returns on plan assets and other changes in actuarial assumptions. Management believes these actuarial gains and losses are primarily financing activities that are more reflective of changes in current conditions in global financial markets (and in particular interest rates) that are not directly related to the underlying business and that do not have an immediate, corresponding impact on the benefits provided to eligible retirees. For further information on the actuarial assumptions and plan assets referenced above, see Management's Discussion & Analysis - Application of Critical Accounting Policies and Estimates - Defined Benefit Pension Plans and Note 7 of Notes to Consolidated Financial Statements included in our Annual Report on Form 10-K for the fiscal year ended February 1, 2014.

44

SEARS HOLDINGS CORPORATION

13 and 26 Weeks Ended August 2, 2014 and August 3, 2013

• Lands' End separation – The results of the Lands' End business that were included in our results of operations prior to the separation.

The following tables set forth results of operations on a GAAP and "As Adjusted" basis, as well as the impact each significant item used in calculating Adjusted EBITDA had on specific income and expense amounts reported in our Condensed Consolidated Statements of Operations during the second quarter and first half of 2014 and 2013.

	13 Weeks Ended August 2, 2014
				Adjustments
millions, except per share data	GAAP			Domestic Pension Expense			Closed Store Reserve, Store Impairments and Severance			Gain on Sales of Assets			Gain on Sale of Canadian Joint Venture			Tax Matters		As Adjusted
Gross margin impact	$	1,742		$	—		$	11		$	—		$	—		$	—	$	1,753
Selling and administrative impact	2,118			(23		)	(29		)	—			—			—		2,066
Depreciation and amortization impact	152			—			(1		)	—			—			—		151
Impairment charges impact	20			—			(20		)	—			—			—		—
Gain on sales of assets impact	(34		)	—			—			10			—			—		(24		)
Operating loss impact	(514		)	23			61			(10		)	—			—		(440		)
Interest and investment income impact	32			—			—			—			(23		)	—		9
Income tax expense impact	(32		)	(9		)	(22		)	4			6			236		183
Loss attributable to noncontrolling interest impact	8			—			(7		)	—			8			1		10
After tax and noncontrolling interest impact	(573		)	14			32			(6		)	(9		)	237		(305		)
Diluted loss per share impact	$	(5.39	)	$	0.13		$	0.30		$	(0.06	)	$	(0.08	)	$	2.23	$	(2.87	)

	13 Weeks Ended August 3, 2013
				Adjustments
millions, except per share data	GAAP			Domestic Pension Expense			Closed Store Reserve, Store Impairments and Severance			Gain on Sales of Assets			Tax Matters		As Adjusted - Reported			Lands' End Separation			As Adjusted(1)
Gross margin impact	$	2,186		$	—		$	7		$	—		$	—	$	2,193		$	(126	)	$	2,067
Selling and administrative impact	2,291			(40		)	(3		)	—			—		2,248			(103		)	2,145
Depreciation and amortization impact	187			—			(1		)	—			—		186			(5		)	181
Gain on sales of assets impact	(241		)	—			—			235			—		(6		)	—			(6		)
Operating loss impact	(51		)	40			11			(235		)	—		(235		)	(18		)	(253		)
Income tax expense impact	(30		)	(15		)	(4		)	89			65		105			7			112
Income attributable to noncontrolling interest impact	(67		)	—			—			88			—		21			—			21
After tax and noncontrolling interest impact	(194		)	25			7			(58		)	65		(155		)	(11		)	(166		)
Diluted loss per share impact	$	(1.83	)	$	0.24		$	0.07		$	(0.55	)	$	0.61	$	(1.46	)	$	(0.10	)	$	(1.56	)

⁽¹⁾ Adjusted to reflect the results of the Lands' End business that were included in our results prior to the separation.

45

SEARS HOLDINGS CORPORATION

13 and 26 Weeks Ended August 2, 2014 and August 3, 2013

	26 Weeks Ended August 2, 2014
				Adjustments
millions, except per share data	GAAP			Domestic Pension Expense			Closed Store Reserve, Store Impairments and Severance			Gain on Sales of Assets			Gain on Sale of Canadian Joint Venture			Tax Matters			Lands' End Separation			As Adjusted(1)
Gross margin impact	$	3,570		$	—		$	18		$	—		$	—		$	—		$	(87	)	$	3,501
Selling and administrative impact	4,207			(45		)	(50		)	—			—			—			(77		)	4,035
Depreciation and amortization impact	307			—			(1		)	—			—			—			(3		)	303
Impairment charges impact	25			—			(25		)	—			—			—			—			—
Gain on sales of assets impact	(80		)	—			—			23			—			—			—			(57		)
Operating loss impact	(889		)	45			94			(23		)	—			—			(7		)	(780		)
Interest and investment income impact	36			—			—			—			(23		)	—			—			13
Income tax expense impact	(29		)	(17		)	(32		)	9			6			394			3			334
Loss attributable to noncontrolling interest impact	48			—			(14		)	—			8			(9		)	—			33
After tax and noncontrolling interest impact	(975		)	28			48			(14		)	(9		)	385			(4		)	(541		)
Diluted loss per share impact	$	(9.17	)	$	0.26		$	0.45		$	(0.13	)	$	(0.08	)	$	3.62		$	(0.04	)	$	(5.09	)

	26 Weeks Ended August 3, 2013
				Adjustments
millions, except per share data	GAAP			Domestic Pension Expense			Closed Store Reserve, Store Impairments and Severance			Gain on Sales of Assets			Tax Matters		As Adjusted - Reported			Lands' End Separation			As Adjusted(1)
Gross margin impact	$	4,342		$	—		$	15		$	—		$	—	$	4,357		$	(258	)	$	4,099
Selling and administrative impact	4,509			(81		)	(8		)	—			—		4,420			(217		)	4,203
Depreciation and amortization impact	378			—			(2		)	—			—		376			(11		)	365
Impairment charges impact	8			—			(8		)	—			—		—			—			—
Gain on sales of assets impact	(255		)	—			—			235			—		(20		)	—			(20		)
Operating loss impact	(298		)	81			33			(235		)	—		(419		)	(30		)	(449		)
Income tax expense impact	(21		)	(30		)	(13		)	89			170		195			12			207
Income attributable to noncontrolling interest impact	(54		)	—			(1		)	88			—		33			—			33
After tax and noncontrolling interest impact	(473		)	51			19			(58		)	170		(291		)	(18		)	(309		)
Diluted loss per share impact	$	(4.46	)	$	0.49		$	0.18		$	(0.55	)	$	1.60	$	(2.74	)	$	(0.17	)	$	(2.91	)

⁽¹⁾ Adjusted to reflect the results of the Lands' End business that were included in our results prior to the separation.

46

SEARS HOLDINGS CORPORATION

13 and 26 Weeks Ended August 2, 2014 and August 3, 2013

We also believe that our use of Adjusted EPS provides an appropriate measure for investors to use in assessing our performance across periods, given that this measure provides an adjustment for certain significant items which may vary significantly from period to period, improving the comparability of year-to-year results and is therefore representative of our ongoing performance. Therefore, we have adjusted our results for them to make our statements more useful and comparable. However, we do not, and do not recommend that you, solely use Adjusted EPS to assess our financial and earnings performance. We also use, and recommend that you use, diluted earnings per share in addition to Adjusted EPS in assessing our earnings performance.

In addition to the significant items included in the Adjusted EBITDA calculation, Adjusted EPS includes the following other significant items which, while periodically affecting our results, may vary significantly from period to period and have a disproportionate effect in a given period, and affects comparability of results.

• Gains on sales of assets - We have recorded significant gains on sales of assets, as well as gains on sales of joint venture interests, which were primarily attributable to several real estate transactions. Management considers these gains on sale of assets to result from investing decisions rather than ongoing operations.

• Tax Matters - In 2011, and again in 2013, we recorded a non-cash charge to establish a valuation allowance against substantially all of our domestic deferred tax assets. Accounting rules generally require that a valuation reserve be established when income has not been generated over a three-year cumulative period to support the deferred tax asset. While an accounting loss was recorded, we believe no economic loss has occurred as these net operating losses and tax benefits remain available to reduce future taxes as income is generated in subsequent periods. As this valuation allowance has a significant impact on the effective tax rate, we have adjusted our results to reflect a standard effective tax rate for the Company beginning in fiscal 2011 when the valuation allowance was first established.

13-week period ended August 2, 2014 compared to the 13-week period ended August 3, 2013

Revenues and Comparable Store Sales

Revenues decreased$858 million to $8.0 billion for the quarter ended August 2, 2014, as compared to revenues of $8.9 billion for the quarter ended August 3, 2013. The revenue decrease included the separation of the Lands' End business, which was completed in the first quarter of 2014 and accounted for $330 million of the decline. The revenue decrease also included the effect of having fewer Kmart and Sears Full-line stores in operation, which accounted for $256 million of the decline, as well as a decrease of $140 million at Sears Canada. Revenues for the quarter also declined as a result of lower domestic comparable store sales, which accounted for $47 million of the decline. Finally, we also experienced a revenue decline in our Home Services business during the quarter, as well as a decline in delivery revenues which when combined, accounted for $55 million of the decline.

Sears Canada's revenue decline of $140 million was driven by a 6.8% decline in comparable store sales, which accounted for $47 million of the decline, as well as the effect of having fewer stores in operation, which accounted for $35 million of the decline. Sears Canada also experienced declines in the Home Services business which accounted for $13 million of the decline. Revenues also included a decrease of $35 million due to foreign currency exchange rates.

For the quarter, domestic comparable store sales declined 0.8%, comprised of a decrease of 1.7% at Kmart and an increase of 0.1% at Sears Domestic. The decline at Kmart primarily was driven by declines in the grocery & household, appliances and consumer electronics categories. The increase at Sears Domestic primarily reflects increases in the home appliances and mattress categories, which were partially offset by decreases in the consumer electronics and lawn & garden categories, as well as a decline in Sears Auto Centers. Excluding the impact of consumer electronics on both formats and grocery & household on the Kmart format, domestic comparable store sales would have increased 0.4%.

47

SEARS HOLDINGS CORPORATION

13 and 26 Weeks Ended August 2, 2014 and August 3, 2013

Gross Margin

Gross margin decreased$444 million to $1.7 billion in the second quarter of 2014 due to the above noted decline in sales, as well as a decline in gross margin rate. Gross margin for the quarter included charges of $11 million and $7 million in 2014 and 2013, respectively, related to store closures. Gross margin for the second quarter of 2013 also included gross margin of $126 million from the Lands' End business.

The gross margin rate during the quarter for both Kmart and Sears Domestic continued to be impacted by transactions that offer both traditional promotional marketing discounts and Shop Your Way points. As compared to the prior year, Kmart's gross margin rate for the second quarter declined 250 basis points, with decreases experienced in a majority of categories, particularly apparel, home and grocery & household. Sears Domestic's gross margin rate declined 330 basis points for the quarter with decreases experienced in a majority of categories, most notably apparel, home appliances (partially due to free delivery), tools and footwear. Sears Canada's gross margin rate declined 230 basis points for the second quarter primarily due to primarily due to reduced margin in home, home appliances, footwear and apparel.

Selling and Administrative Expenses

Selling and administrative expenses decreased$173 million in the second quarter of 2014 compared to the prior year quarter and included significant items such as expenses related to our domestic pension plan, store closings and severance of $52 million and $43 million for 2014 and 2013, respectively. In addition, the second quarter of 2013 included expenses of $103 million from the Lands' End business. Excluding these items, selling and administrative expenses declined $79 million primarily due to a decrease in payroll expense.

Our selling and administrative expenses as a percentage of total revenues ("selling and administrative expense rate") was 26.4% for the second quarter of 2014, compared to 25.8% in the prior year, as the decreases in overall selling and administrative expenses were more than offset by the above noted decline in revenues.

Gain on Sales of Assets

We recorded total gains on sales of assets for the second quarter of $34 million in 2014 and $241 million in 2013. The gains recorded during the second quarter of 2014 included a gain of $10 million related to the sale of one Kmart store for which we received $10 million cash proceeds. The gains recorded during the second quarter of 2013 included a gain of $180 million recognized on the amendment and early termination of the leases on two properties operated by Sears Canada for which Sears Canada received $184 million ($191 million Canadian) in cash proceeds. Gain on sales of assets recorded in the second quarter of 2013 also included a gain of $55 million related to the sale of a store previously operated under The Great Indoors format, two Sears Full-line stores and one Kmart store, for which the Company received $86 million in cash proceeds.

Operating Loss

The Company reported an operating loss of $514 million and $51 million in the second quarter of 2014 and 2013, respectively. Operating loss for the second quarter of 2014 included expenses related to our domestic pension plan, store closings, store impairments and severance, as well as gains on the sales of assets, which aggregated to operating expense of $74 million. Operating loss for the second quarter of 2013 included expenses related to our domestic pension plan, store closings, store impairments and severance, as well as operating income from the Lands' End business and gains on the sales of assets, which aggregated to operating income of $202 million. Excluding these items, we would have reported an operating loss of $440 million and $253 million in the second quarter of 2014 and 2013, respectively. The increase in operating loss in 2014 was primarily driven by the above noted declines in sales and gross margin, partially offset by a decline in selling and administrative expenses.

Interest and Investment Income

The Company reported interest and investment income of $32 million and $14 million in the second quarter of 2014 and 2013, respectively. During 2014, investment income included a gain of $23 million related to the sale of its 15% joint venture interest in one property Sears Canada owned with Ivanhoe Cambridge II Inc., for which Sears Canada received $30 million($33 million Canadian) in cash proceeds.

48

SEARS HOLDINGS CORPORATION

13 and 26 Weeks Ended August 2, 2014 and August 3, 2013

Income Taxes

Our effective tax rate for the second quarter of 2014 was an expense rate of 5.8% compared to an expense rate of 30.9% in the prior year quarter. The application of the requirements for accounting for income taxes in interim periods, after consideration of our valuation allowance, causes a significant variation in the typical relationship between income tax expense and pretax income. The tax rate in 2014 and 2013 reflect the effect of not recognizing the benefit of current period losses in certain domestic jurisdictions in which it is not more likely than not that such benefits would be realized. The second quarter of 2014 was negatively impacted by increased foreign taxes in Puerto Rico resulting from a new tax law change which became effective during the second quarter of 2014, as well as a tax settlement, but were partially offset by current period losses attributable to Sears Canada.

26-week period ended August 2, 2014 compared to the 26-week period ended August 3, 2013

Revenues and Comparable Store Sales

For the first half of 2014, revenues decreased$1.4 billion to $15.9 billion as compared to revenues of $17.3 billion for the first half of 2013. The revenue decrease included the effect of having fewer Kmart and Sears Full-line stores in operation, which accounted for $444 million of the decline. In addition, the revenue decrease included a decrease of $427 million due to the separation of the Lands' End business, which was completed on April 4, 2014, as well as a $285 million decline at Sears Canada. Revenues for the first half of 2014 also declined as a result of lower domestic comparable store sales, which accounted for $103 million of the decline. Finally, we also experienced a revenue decline in our Home Services business during the first half of 2014, as well as a decline in delivery revenues which when combined, accounted for $105 million of the decline.

Sears Canada's revenue decline of $285 million was driven by a 7.1% decline in comparable store sales, which accounted for $93 million of the decline, as well as the effect of having fewer stores in operation, which accounted for $59 million of the decline. Sears Canada also experienced declines in the Home Services business which accounted for $20 million of the decline. Revenues also included a decrease of $95 million due to foreign currency exchange rates.

Domestic comparable store sales declined 0.9% comprised of a decrease of 1.9% at Kmart and an increase of 0.2% at Sears Domestic. The decline at Kmart primarily was driven by declines in the consumer electronics and grocery & household categories. Excluding these two categories, comparable store sales would have declined 0.6%. The increase at Sears Domestic primarily reflects increases in the home appliance and mattress categories, which were partially offset by decreases in the consumer electronics and lawn & garden categories, as well as a decline in Sears Auto Centers. Excluding the impact of consumer electronics on both formats and grocery & household on the Kmart format, domestic comparable store sales would have increased 0.3%.

Gross Margin

For the first half of the year, our gross margin decreased$772 million to $3.6 billion in 2014 due to the above noted decline in sales, as well as a decline in gross margin rate. Gross margin for the first half of 2014 included gross margin of $87 million from the Lands' End business prior to the separation as compared to $258 million in the first half of 2013. Gross margin for the first half of the year also included charges of $18 million and $15 million in 2014 and 2013, respectively, related to store closures.

The gross margin rate for both Kmart and Sears Domestic continued to be impacted by transactions that offer both traditional promotional marketing discounts and Shop Your Way points. As compared to the prior year, Kmart's gross margin rate for the first half of 2014 declined 230 basis points, with decreases experienced in a majority of categories, particularly apparel, home, grocery & household and consumer electronics. Sears Domestic's gross margin rate declined 260 basis points for the first half of the year with decreases experienced in the apparel, home appliances (partially due to free delivery), consumer electronics and tools categories. Sears Canada's gross margin rate declined 340 basis points for the first half of 2014 primarily due to reduced margin in home, home appliances, footwear and apparel.

49

SEARS HOLDINGS CORPORATION

13 and 26 Weeks Ended August 2, 2014 and August 3, 2013

Selling and Administrative Expenses

Selling and administrative expenses decreased$302 million in the first half of 2014 compared to the first half of 2013 and included significant items such as expenses related to our domestic pension plan, store closings and severance of $95 million and $89 million for 2014 and 2013, respectively. In addition, the first half of 2014 included expenses of $77 million from the Lands' End business prior to the separation as compared to $217 million in the first half of 2013. Excluding these items, selling and administrative expenses declined $168 million primarily due to a decrease in payroll expense.

Our selling and administrative rate was 26.5% for the first half of 2014, compared to 26.0% in the prior year, as the decreases in overall selling and administrative expenses were more than offset by the above noted decline in revenues.

Gain on Sales of Assets

We recorded total gains on sales of assets of $80 million and $255 million for the first half of 2014 and 2013, respectively. The gains recorded during the first half of 2014 included a gain of $13 million recognized on the sale of a distribution facility in our Sears Domestic segment for which we received $16 million of cash proceeds and a gain of $10 million recognized on the sale of a Kmart store for which we received $10 million of cash proceeds. The gains recorded during the first half of 2013 included a gain of $180 million recognized on the amendment and early termination of the leases on two properties operated by Sears Canada for which Sears Canada received $184 million ($191 million Canadian) in cash proceeds. Gain on sales of assets recorded for the first half of 2013 also included a gain of $55 million related to the sale of a store previously operated under The Great Indoors format, two Sears Full-line stores and one Kmart store for which the Company received $86 million in cash proceeds.

Operating Loss

We reported an operating loss of $889 million and $298 million in the first half of 2014 and 2013, respectively. Operating loss for the first half of 2014 included expenses related to our domestic pension plan, store closings, store impairments and severance, as well as gains on the sales of assets and operating income from the Lands' End business, which aggregated to expense of $109 million. Operating loss for the first half of 2013 included expenses related to our domestic pension plan, store closings, store impairments and severance, as well as operating income from the Lands' End business and gains on the sales of assets, which aggregated to operating income of $151 million. Excluding these items, we would have reported an operating loss of $780 million and $449 million in the first half of 2014 and 2013, respectively. The increase in operating loss in 2014 was primarily driven by the above noted declines in sales and gross margin, partially offset by a decline in selling and administrative expenses.

Interest and Investment Income

The Company reported interest and investment income of $36 million and $21 million in the first half of 2014 and 2013, respectively. During 2014, investment income included a gain of $23 million related to the sale of its 15% joint venture interest in one property Sears Canada owned with Ivanhoe Cambridge II Inc., for which Sears Canada received $30 million($33 million Canadian) in cash proceeds.

Income Taxes

Our effective tax rate for the first half of 2014 was an expense rate of 2.9% compared to an expense rate of 5.3% for the first half of 2013. The application of the requirements for accounting for income taxes in interim periods, after consideration of our valuation allowance, causes a significant variation in the typical relationship between income tax expense and pretax income/loss. Our tax rate continues to reflect the effect of not recognizing the benefit of current period losses in certain domestic jurisdictions where it is not more likely than not that such benefits would be realized. In addition, the first half of 2014 was negatively impacted by increased foreign taxes in Puerto Rico resulting from a new tax law change which became effective during the second quarter of 2014, as well as a tax settlement, but were partially offset by current period losses attributable to Sears Canada

50

SEARS HOLDINGS CORPORATION

13 and 26 Weeks Ended August 2, 2014 and August 3, 2013

SEGMENT OPERATIONS

The following discussion of our business segment results is organized into three reportable segments: Kmart, Sears Domestic and Sears Canada.

Kmart

Kmart results and key statistics were as follows:

	13 Weeks Ended						26 Weeks Ended
millions, except number of stores	August 2, 2014			August 3, 2013			August 2, 2014			August 3, 2013
Merchandise sales and services	$	2,923		$	3,168		$	5,820		$	6,271
Cost of sales, buying and occupancy	2,341			2,459			4,643			4,857
Gross margin dollars	582			709			1,177			1,414
Gross margin rate	19.9		%	22.4		%	20.2		%	22.5		%
Selling and administrative	729			747			1,420			1,460
Selling and administrative expense as a percentage of total revenues	24.9		%	23.6		%	24.4		%	23.3		%
Depreciation and amortization	24			33			47			66
Impairment charges	2			—			2			—
Gain on sales of assets	(31		)	(15		)	(52		)	(28		)
Total costs and expenses	3,065			3,224			6,060			6,355
Operating loss	$	(142	)	$	(56	)	$	(240	)	$	(84	)
Adjusted EBITDA	$	(120	)	$	(30	)	$	(207	)	$	(30	)
Number of stores							1,077			1,195

13-week period ended August 2, 2014 compared to the 13-week period ended August 3, 2013

Revenues and Comparable Store Sales

For the quarter, Kmart’s revenues decreased by $245 million to $2.9 billion in 2014 primarily due to the effect of having fewer stores in operation, which accounted for $195 million of the decline. Revenues were also impacted by a decrease in comparable store sales of 1.7%, which accounted for $50 million of the decline.

The decline in comparable store sales was primarily driven by declines in the grocery & household, appliances and consumer electronics categories. Excluding the grocery & household and consumer electronics categories, comparable store sales would have declined 1.0%.

Gross Margin

For the quarter, Kmart generated $582 million in gross margin in 2014 compared to $709 million in 2013. The decrease in Kmart’s gross margin was due to both the decrease in sales as well as a decrease in gross margin rate. Gross margin for the second quarter of 2014 and 2013 included charges of $10 million and $4 million, respectively, related to store closures.

Kmart’s gross margin rate for the quarter declined 250 basis points to 19.9% in 2014 from 22.4% in 2013, and was impacted by transactions that offer both traditional promotional marketing discounts and Shop Your Way points. The gross margin rate declined due to decreases experienced in a majority of categories, particularly apparel, home and grocery & household.

51

SEARS HOLDINGS CORPORATION

13 and 26 Weeks Ended August 2, 2014 and August 3, 2013

Selling and Administrative Expenses

For the quarter, Kmart’s selling and administrative expenses decreased$18 million as compared to the second quarter in 2013. The decrease primarily reflects decreases in payroll expense. Selling and administrative expenses for the second quarter of 2014 and 2013 were impacted by expenses of $17 million and $4 million, respectively, related to store closings and severance.

Kmart’s selling and administrative expense rate for the quarter was 24.9% in 2014 and 23.6% in 2013 and increased primarily as a result of lower expense leverage due to the sales decline noted above.

Gain on Sales of Assets

Kmart recorded total gains on sales of assets for the second quarter of $31 million in 2014 and $15 million in 2013. The gains recorded during the second quarter of 2014 included a gain of $10 million related to the sale of one Kmart store for which we received $10 million cash proceeds. The gains recorded during the second quarter of 2013 included a gain of $12 million related to the sale of one Kmart store for which the Company received $12 million in cash proceeds.

Operating Loss

For the quarter, Kmart recorded an operating loss of $142 million and $56 million in 2014 and 2013, respectively. Operating loss for the second quarter of 2014 included expenses related to store closings, store impairments and severance, as well as gain on sales of assets which aggregated to an operating loss of $20 million. Operating loss for the second quarter of 2013 included expenses related to store closings and severance, as well as gains on sales of assets which aggregated to operating income of $4 million. Excluding these items, Kmart would have reported an operating loss of $122 million and $60 million in the second quarter of 2014 and 2013, respectively. The increase in Kmart’s operating loss was primarily the result of the above noted declines in sales and gross margin, partially offset by the decline in selling and administrative expenses.

26-week period ended August 2, 2014 compared to the 26-week period ended August 3, 2013

Revenues and Comparable Store Sales

For the first half of 2014, Kmart’s revenues decreased by $451 million to $5.8 billion in 2014, primarily due to the effect of having fewer stores in operation, which accounted for $340 million of the decline. Revenues were also impacted by a decrease in comparable store sales of 1.9%, which accounted for $111 million of the decline.

The decline in comparable store sales was primarily driven by declines in the consumer electronics and grocery & household categories. Excluding these two categories, comparable store sales would have declined 0.6%.

Gross Margin

For the first half of 2014, Kmart generated $1.2 billion in gross margin compared to $1.4 billion in the first half of 2013. The decrease in Kmart’s gross margin was due to both the decrease in sales as well as a decrease in gross margin rate. Gross margin for the first half 2014 and 2013 included charges of $15 million and $9 million, respectively, related to store closures.

Kmart’s gross margin rate for the first half of the year declined 230 basis points to 20.2% in 2014 from 22.5% in 2013, and was impacted by transactions that offer both traditional promotional marketing discounts and Shop Your Way points. The gross margin rate declined due to decreases experienced in a majority of categories, particularly apparel, home, grocery & household and consumer electronics.

Selling and Administrative Expenses

For the first half of 2014, Kmart’s selling and administrative expenses decreased$40 million as compared to the first half of 2013. The decrease primarily reflects a decrease in payroll expense. Selling and administrative expenses for the first half of 2014 and 2013 were impacted by expenses of $21 million and $7 million, respectively, related to store closings and severance.

52

SEARS HOLDINGS CORPORATION

13 and 26 Weeks Ended August 2, 2014 and August 3, 2013

Kmart’s selling and administrative expense rate for the first half was 24.4% in 2014 and 23.3% in 2013 and increased primarily as a result of lower expense leverage due to the sales decline noted above.

Gain on Sales of Assets

Kmart recorded total gains on sales of assets for the first half of $52 million in 2014 and $28 million in 2013. The gains recorded during the first half of 2014 included a gain of $10 million related to the sale of one Kmart store for which we received $10 million cash proceeds. The gains recorded during the first half of 2013 included a gain of $12 million related to the sale of one Kmart store for which the Company received $12 million in cash proceeds.

Operating Loss

For the first half of the year, Kmart recorded an operating loss of $240 million and $84 million in 2014 and 2013, respectively. Operating loss for the first half of 2014 included expenses related to store closings, store impairments and severance, as well as gains on sales of assets which aggregated to an operating loss of $29 million. Operating loss for the first half of 2013 included expenses related to store closings and severance, as well as gains on sales of assets which aggregated to an operating loss of $5 million. Excluding these items, Kmart would have reported an operating loss of $211 million and $79 million in the first half of 2014 and 2013, respectively. The increase in Kmart’s operating loss was primarily the result of the above noted declines in sales and gross margin, partially offset by the decline in selling and administrative expenses.

Sears Domestic

Sears Domestic results and key statistics were as follows:

	13 Weeks Ended						26 Weeks Ended
millions, except number of stores	August 2, 2014			August 3, 2013			August 2, 2014			August 3, 2013
Merchandise sales and services	$	4,310		$	4,783		$	8,595		$	9,290
Cost of sales, buying and occupancy	3,334			3,544			6,550			6,837
Gross margin dollars	976			1,239			2,045			2,453
Gross margin rate	22.6		%	25.9		%	23.8		%	26.4		%
Selling and administrative	1,184			1,301			2,356			2,556
Selling and administrative expense as a percentage of total revenues	27.5		%	27.2		%	27.4		%	27.5		%
Depreciation and amortization	110			129			224			262
Impairment charges	3			—			8			8
Gain on sales of assets	(3		)	(45		)	(29		)	(46		)
Total costs and expenses	4,628			4,929			9,109			9,617
Operating loss	$	(318	)	$	(146	)	$	(514	)	$	(327	)
Adjusted EBITDA	$	(178	)	$	(20	)	$	(259	)	$	(17	)
Lands' End separation	—			(23		)	(10		)	(41		)
Adjusted EBITDA(1)	$	(178	)	$	(43	)	$	(269	)	$	(58	)
Number of:
Full-line stores							757			791
Specialty stores							36			50
Total Domestic Sears Stores							793			841

⁽¹⁾ Adjusted to reflect the results of the Lands' End business that were included in our results of operations prior to the separation.

53

SEARS HOLDINGS CORPORATION

13 and 26 Weeks Ended August 2, 2014 and August 3, 2013

13-week period ended August 2, 2014 compared to the 13-week period ended August 3, 2013

Revenues and Comparable Store Sales

For the quarter, Sears Domestic's revenues decreased by $473 million to $4.3 billion. The decline in revenue was driven by the separation of the Lands' End business, which was completed on April 4, 2014 and accounted for $330 million of the decline, as well as the effect of having fewer Full-line stores in operation, which accounted for $61 million of the decline. Sears Domestic also experienced a revenue decline in its Home Services business during the quarter, as well as a decline in delivery revenues which when combined, accounted for $55 million of the decline. Revenues were also impacted by an increase in comparable store sales of 0.1%, which partially offset the decline in revenues by $3 million.

The increase in comparable store sales for the quarter primarily reflects an increase in the home appliances and mattress categories, which was partially offset by decreases in the consumer electronics and lawn & garden categories, as well as a decline in Sears Auto Centers. Excluding the impact of consumer electronics, comparable store sales would have increased 1.6%.

Gross Margin

For the quarter, Sears Domestic generated gross margin dollars of $1.0 billion and $1.2 billion in 2014 and 2013, respectively. Gross margin included charges of $3 million in the second quarter of 2013 related to store closures, as well as gross margin of $126 million from the Lands' End business in the second quarter of 2013. Excluding these items, gross margin decreased $140 million.

Sears Domestic's gross margin rate for the quarter decreased330 basis points to 22.6% in 2014 from 25.9% in 2013, and was impacted by transactions that offer both traditional promotional marketing discounts and Shop Your Way points. The gross margin rate declined primarily due to decreases experienced in a majority of categories, most notably apparel, home appliances (partially due to free delivery), tools and footwear.

Selling and Administrative Expenses

For the quarter, Sears Domestic's selling and administrative expenses decreased$117 million in 2014 as compared to 2013. Selling and administrative expenses for the second quarter of 2014 and 2013, respectively, were impacted by expenses related to our domestic pension plan, store closings and severance of $30 million and $39 million. The second quarter of 2013 also included selling and administrative expense related to the Lands' End business of $103 million. Excluding these items, selling and administrative expenses decreased $5 million primarily due to a decrease in payroll expense.

Sears Domestic’s selling and administrative expense rate for the quarter was 27.5% in 2014 and 27.2% in 2013 and increased primarily as a result of lower expense leverage due to the sales decline noted above.

Gain on Sales of Assets

Sears Domestic recorded a total gain on sales of assets for the second quarter of $3 million and $45 million in 2014 and 2013, respectively. The gains recorded in the second quarter of 2013 included a gain of $43 million related to the sale of a store previously operated under The Great Indoors format and two Sears Full-line stores for which the Company received $74 million in cash proceeds.

Operating Loss

For the quarter, Sears Domestic reported an operating loss of $318 million and $146 million in 2014 and 2013, respectively. Sears Domestic's operating loss for the second quarter of 2014 included expenses related to our domestic pension plan, store closings, store impairments and severance, which aggregated to operating expense of $33 million. Sears Domestic's operating loss for the second quarter of 2013 included expenses related to our domestic pension plan, store closings, store impairments and severance as well as gains on sales of assets and operating income of the Lands' End business which aggregated to operating income of $18 million. Excluding these items, Sears Domestic would have reported an operating loss of $285 million and $164 million in the second quarter

54

SEARS HOLDINGS CORPORATION

13 and 26 Weeks Ended August 2, 2014 and August 3, 2013

of 2014 and 2013, respectively. The increase in operating loss in 2014 was primarily driven by the above noted declines in sales and gross margin.

26-week period ended August 2, 2014 compared to the 26-week period ended August 3, 2013

Revenues and Comparable Store Sales

For the first half of 2014, Sears Domestic's revenues decreased by $695 million to $8.6 billion. The decline in revenue was driven by the separation of the Lands' End business, which was completed on April 4, 2014 and accounted for $427 million of the decline, as well as the effect of having fewer Full-line stores in operation, which accounted for $104 million of the decline. Sears Domestic also experienced a revenue decline in its Home Services business during the first half of 2014, as well as a decline in delivery revenues which when combined, accounted for $105 million of the decline. Revenues were also impacted by an increase in comparable store sales of 0.2%, which partially offset the decline in revenues by $8 million

The increase in comparable store sales for the first half of 2014 primarily reflects an increase in the home appliance and mattress categories, which was partially offset by decreases in the lawn & garden, consumer electronics and sporting goods categories, as well as a decline in Sears Auto Centers. Excluding the impact of consumer electronics, comparable store sales would have increased 1.2%.

Gross Margin

For the first half of the year, Sears Domestic generated gross margin dollars of $2.0 billion and $2.5 billion in 2014 and 2013, respectively. Gross margin included charges of $2 million and $6 million in the first half of 2014 and 2013, respectively, related to store closures, as well as gross margin of $87 million and $258 million from the Lands' End business in the first half of 2014 and 2013, respectively. Excluding these items, gross margin decreased $241 million.

Sears Domestic's gross margin rate for the first half of the year decreased260 basis points to 23.8% in 2014 from 26.4% in 2013, and was impacted by transactions that offer both traditional promotional marketing discounts and Shop Your Way points. The gross margin rate declined primarily due to decreases experienced in the apparel, home appliances (partially due to free delivery), consumer electronics and tools categories.

Selling and Administrative Expenses

For the first half of the year, Sears Domestic's selling and administrative expenses decreased$200 million in 2014 as compared to 2013 and included expenses related to our domestic pension plan, store closings and severance of $50 million and $80 million, respectively. The first half of 2014 and 2013 also included selling and administrative expenses related to the Lands' End business of $77 million and $217 million, respectively. Excluding these items, selling and administrative expenses decreased $30 million primarily due to a decrease in payroll expense.

Sears Domestic's selling and administrative expense rate for the first half of the year was 27.4% in 2014 and 27.5% in 2013 and decreased slightly as the above noted expense reduction was offset by the above noted decline in revenues.

Gain on Sales of Assets

Sears Domestic recorded a total gain on sales of assets for the first half of $29 million and $46 million in 2014 and 2013, respectively. The gains recorded during the first half of 2014 included a gain of $13 million recognized on the sale of a distribution facility for which we received $16 million cash proceeds. The gains recorded in the first half of 2013 included a gain of $43 million related to the sale of a store previously operated under The Great Indoors format and two Sears Full-line stores for which the Company received $74 million in cash proceeds.

Operating Loss

For the first half of the year, Sears Domestic reported an operating loss of $514 million and $327 million in 2014 and 2013, respectively. Sears Domestic's operating loss for the first half of 2014 and 2013 included expenses related

55

SEARS HOLDINGS CORPORATION

13 and 26 Weeks Ended August 2, 2014 and August 3, 2013

to our domestic pension plan, store closings, store impairments and severance, as well as gains on sales of assets and operating income from the Lands' End business, which aggregated to operating expense of $40 million and $22 million, respectively. Excluding these items, we would have reported an operating loss of $474 million and $305 million in the first half of 2014 and 2013, respectively. The increase in operating loss in 2014 was primarily driven by the above noted declines in sales and gross margin, partially offset by the decrease in selling and administrative expenses.

Sears Canada

Sears Canada, a consolidated, 51%-owned subsidiary of Sears, conducts similar retail operations as Sears Domestic. Sears Canada results and key statistics were as follows:

	13 Weeks Ended						26 Weeks Ended
millions, except number of stores	August 2, 2014			August 3, 2013			August 2, 2014			August 3, 2013
Merchandise sales and services	$	780		$	920		$	1,477		$	1,762
Cost of sales, buying and occupancy	596			682			1,129			1,287
Gross margin dollars	184			238			348			475
Gross margin rate	23.6		%	25.9		%	23.6		%	27.0		%
Selling and administrative	205			243			431			493
Selling and administrative expense as a percentage of total revenues	26.3		%	26.4		%	29.2		%	28.0		%
Depreciation and amortization	18			25			36			50
Impairment charges	15			—			15			—
(Gain) loss on sales of assets	—			(181		)	1			(181		)
Total costs and expenses	834			769			1,612			1,649
Operating income (loss)	$	(54	)	$	151		$	(135	)	$	113
Adjusted EBITDA	$	(15	)	$	(5	)	$	(58	)	$	(16	)
Number of:
Full-line stores							113			118
Specialty stores							319			343
Total Sears Canada Stores							432			461

13-week period ended August 2, 2014 compared to the 13-week period ended August 3, 2013

Revenues and Comparable Store Sales

Sears Canada’s revenues decreased$140 million for the second quarter of 2014 as compared to the same period last year and included a decrease of $35 million due to the impact of exchange rates during the quarter. On a Canadian dollar basis, revenues decreased by $105 million predominately due to lower comparable store sales, which accounted for $47 million of the decline, and the effect of having fewer stores in operation, which accounted for $35 million of the decline. Sears Canada also experienced declines in the Home Services business which accounted for $13 million of the decline. Comparable store sales declined 6.8%, primarily due to sales declines in home appliances, apparel and accessories, home and consumer electronics.

Gross Margin

Gross margin dollars for the second quarter decreased$54 million in 2014 to $184 million, and included a $7 million decrease due to the impact of exchange rates. Gross margin decreased $47 million on a Canadian dollar basis. Gross margin for the second quarter of 2014 included charges of $1 million related to store closures.

56

SEARS HOLDINGS CORPORATION

13 and 26 Weeks Ended August 2, 2014 and August 3, 2013

For the quarter, Sears Canada’s gross margin rate declined 230 basis points to 23.6% from 25.9% in 2013 primarily due to reduced margin in home, home appliances, footwear and apparel.

Selling and Administrative Expenses

For the second quarter of 2014, Sears Canada’s selling and administrative expenses decreased$38 million, and included a decrease of $9 million due to the impact of exchange rates. On a Canadian dollar basis, selling and administrative expenses decreased by $29 million primarily due to a decrease in payroll expense. Selling and administrative expenses for the second quarter of 2014 were impacted by expenses of $5 million related to store closings and severance.

Sears Canada’s selling and administrative expense rate for the quarter was 26.3% in 2014 and 26.4% in 2013 and decreased slightly as the overall decline in selling and administrative expenses was partially offset by the above noted decline in revenues.

Gain on Sales of Assets

Sears Canada recorded total gains on sales of assets of $181 million for the second quarter of 2013 which included a gain of $180 million recognized on the amendment and early termination of the leases on two properties operated by Sears Canada for which Sears Canada received $184 million ($191 million Canadian) in cash proceeds.

Operating Income (Loss)

Sears Canada recorded an operating loss of $54 million in the second quarter of 2014 compared to operating income of $151 million in the second quarter of 2013. Sears Canada's operating loss for the second quarter of 2014 included expense of $21 million related to store closings, store impairments and severance, while the second quarter 2013 operating income included gains on sales of assets of $180 million. Excluding these items, Sears Canada would have reported an operating loss of $33 million and $29 million for the second quarter of 2014 and 2013, respectively. Operating loss increased in 2014 due to the above noted declines in sales and gross margin, partially offset by the decrease in selling and administrative expenses.

26-week period ended August 2, 2014 compared to the 26-week period ended August 3, 2013

Revenues and Comparable Store Sales

Sears Canada’s revenues decreased$285 million for the first half of 2014 as compared to the same period last year and included a decrease of $95 million due to the impact of exchange rates during the first half of the year. On a Canadian dollar basis, revenues decreased by $190 million predominately due to lower comparable store sales, which accounted for $93 million of the decline, and the effect of having fewer stores in operation, which accounted for $59 million of the decline. Sears Canada also experienced declines in the Home Services business which accounted for $20 million of the decline. Comparable store sales declined 6.8%, primarily due to sales declines in home appliances, apparel and accessories, home and consumer electronics.

Gross Margin

Gross margin dollars for the first half decreased$127 million in 2014 to $348 million, and included a $21 million decrease due to the impact of exchange rates. Gross margin decreased $106 million on a Canadian dollar basis. Gross margin for the first half of 2014 included charges of $1 million related to store closures.

For the first half of the year, Sears Canada’s gross margin rate decreased340 basis points to 23.6% from 27.0% in 2013 primarily due to reduced margin in home, home appliances, footwear and apparel.

Selling and Administrative Expenses

For the first half of 2014, Sears Canada’s selling and administrative expenses decreased$62 million, and included a decrease of $28 million due to the impact of exchange rates. On a Canadian dollar basis, selling and administrative expenses decreased by $34 million primarily due to a decreases in payroll and advertising expense. Selling and

57

SEARS HOLDINGS CORPORATION

13 and 26 Weeks Ended August 2, 2014 and August 3, 2013

administrative expenses for the first half of 2014 and 2013 were impacted by expenses of $24 million and $2 million, respectively, related to store closings and severance.

Sears Canada’s selling and administrative expense rate for the first half was 29.2% in 2014 and 28.0% in 2013 and increased as a result of the above noted decline in revenues, partially offset by of the overall decline in selling and administrative expenses.

Gain on Sales of Assets

Sears Canada recorded total gains on sales of assets of $181 million for the first half of half of 2013 which included a gain of $180 million recognized on the amendment and early termination of the leases on two properties operated by Sears Canada for which Sears Canada received $184 million ($191 million Canadian) in cash proceeds.

Operating Income (Loss)

Sears Canada recorded an operating loss of $135 million and operating income of $113 million in the first half of 2014 and 2013, respectively. Sears Canada's operating loss for the first half included expense of $40 million related to store closings, store impairments and severance in 2014. Sears Canada's operating income for 2013 included expense of $2 million related to severance, as well as gain on the sales of assets of $180 million. Excluding these items, Sears Canada would have reported an operating loss of $95 million and $65 million for the first half of 2014 and 2013, respectively. Operating loss increased in 2014 due to the above noted declines in sales and gross margin, partially offset by the decrease in selling and administrative expenses.

ANALYSIS OF CONSOLIDATED FINANCIAL CONDITION

Cash Balances

Our cash and cash equivalents include all highly liquid investments with original maturities of three months or less at the date of purchase. Our cash balances as of August 2, 2014, August 3, 2013 and February 1, 2014 are detailed in the following table.

millions	August 2, 2014		August 3, 2013		February 1, 2014
Domestic
Cash and equivalents	$	431	$	206	$	428
Cash posted as collateral	18		19		18
Credit card deposits in transit	147		158		131
Total domestic cash and cash equivalents	596		383		577
Sears Canada	233		288		451
Total cash and cash equivalents	829		671		1,028
Restricted cash	10		10		10
Total cash balances	$	839	$	681	$	1,038

We had total cash balances of $839 million at August 2, 2014, $681 million at August 3, 2013 and $1.0 billion at February 1, 2014. During the first half of 2014, the Company received a $500 million dividend from Lands' End immediately prior to the completion of the spin-off. The decrease in cash during the first half of 2014 was primarily due to operating losses.

At various times, we have posted cash collateral for certain outstanding letters of credit and self-insurance programs. Such cash collateral is classified within cash and cash equivalents given we have the ability to substitute letters of credit at any time for this cash collateral and it is therefore readily available to us.

Our invested cash may include, from time to time, investments in, but not limited to, commercial paper, federal, state and municipal government securities, floating-rate notes, repurchase agreements and money market funds. Cash amounts held in these short-term investments are readily available to us.

58

SEARS HOLDINGS CORPORATION

13 and 26 Weeks Ended August 2, 2014 and August 3, 2013

Credit card deposits in transit include deposits in transit from banks for payments related to third-party credit card and debit card transactions.

Restricted cash consists of cash related to Sears Canada’s balances, which have been pledged as collateral for letters of credit obligations issued under its offshore merchandise purchasing program.

We classify outstanding checks in excess of funds on deposit within other current liabilities and reduce cash balances when these checks clear the bank on which they were drawn. Outstanding checks in excess of funds on deposit were $86 million, $89 million and $97 million as of August 2, 2014, August 3, 2013 and February 1, 2014, respectively.

Operating Activities

During the first half of 2014, we used net cash in operating activities of $747 million compared to $715 million in the prior year first half. Our primary source of operating cash flows is the sale of goods and services to customers, while the primary use of cash in operations is the purchase of merchandise inventories. We used more cash in operations in the first half of 2014 compared to the prior year primarily driven by an increase in operating loss, which was partially offset by less cash being used for merchandise inventory purchases due to inventory productivity initiatives and store closures.

Merchandise inventories were $6.4 billion at August 2, 2014 and $7.7 billion at August 3, 2013. Merchandise payables were $2.5 billion at August 2, 2014 and $2.9 billion at August 3, 2013. Our Domestic inventory balances decreased approximately $1.1 billion from $6.9 billion at August 3, 2013 to $5.8 billion at August 2, 2014. Excluding inventory related to the Lands' End business, our Domestic inventory decreased approximately $710 million due to both improved productivity and store closures. Sears Domestic inventory decreased in virtually all categories, with the most notable decreases in the apparel, consumer electronics, automotive and jewelry categories. Kmart inventory also decreased in almost all categories with the most notable decreases in the apparel, consumer electronics, home and drugstore categories. Sears Canada inventory decreased by approximately $200 million also due to improved productivity and store closures.

Investing Activities

During the first half of 2014, we generated net cash flows from investing activities of $38 million, which consisted of cash proceeds from the sale of properties of $164 million partially offset by cash used for capital expenditures of $126 million. For the first half of 2013, we generated net cash flows from investing activities of $170 million, which consisted of cash generated from the sales of properties of $287 million partially offset by cash used for capital expenditures of $116 million.

Financing Activities

For the first half of 2014, we generated net cash flows from financing activities of $503 million which primarily consisted of Lands' End pre-separation funding of $515 million and an increase in short-term borrowings of $72 million, partially offset by repayments of long-term debt of $42 million. This compares to net cash flows from financing activities of $618 million in prior year first half, which was primarily driven by an increase in short-term borrowings of $662 million, partially offset by repayments of long-term debt of $46 million.

We did not repurchase any of our common shares under our share repurchase program in the first half of 2014 or 2013. The common share repurchase program was initially announced in 2005 and had a total authorization since inception of the program of $6.5 billion. At August 2, 2014, we had $504 million of remaining authorization under the program. The common share repurchase program has no stated expiration date and share repurchases may be implemented using a variety of methods, which may include open market purchases, privately negotiated transactions, block trades, accelerated share repurchase transactions, the purchase of call options, the sale of put options or otherwise, or by any combination of such methods.

Liquidity

Our primary need for liquidity is to fund working capital requirements of our businesses, capital expenditures and for general corporate purposes, including debt repayment and pension plan contributions. We consider ourselves to

59

SEARS HOLDINGS CORPORATION

13 and 26 Weeks Ended August 2, 2014 and August 3, 2013

be an asset-rich enterprise with substantial liquidity and financial flexibility. Our assets include a substantial unencumbered owned and leased real estate portfolio, market leading proprietary brands such as Kenmore, Craftsman and DieHard, as well as well-established stand-alone businesses such as Sears Canada. We believe that we benefit from multiple potential funding resources, including our $3.275 billion domestic revolving credit facility through April 2016, and a $300 million Canadian revolving credit facility through May 2019, which is subject to potential reserves. In addition, as discussed in Note 2 of the Notes to Consolidated Financial Statements, the Company completed a $1.0 billion senior secured term loan facility under the Company's existing Second Amended and Restated Credit Agreement in the third quarter of 2013. Further, our $1.24 billion of senior secured notes are due in 2018 and there is approximately $327 million of remaining Sears debt from the Merger. These funding resources and obligations are described in more detail below. In addition, at August 2, 2014, we had cash balances of $839 million and $3.9 billion of inventory, net of payables. The domestic revolving credit facility and senior secured notes are supported by an asset base which includes $5.8 billion of domestic inventory.

We believe the Company has a solid financial position with the flexibility to implement our transformation strategy. During the first half of 2014, we generated approximately $665 million in additional liquidity, including the $500 million dividend received from the separation of Lands' End. BofA Merrill Lynch continues to assist us in exploring strategic alternatives for our 51% interest in Sears Canada Inc., including a potential sale of our interest or Sears Canada as a whole. Our interest in Sears Canada has a current market value of approximately $765 million as of August 19, 2014. In addition, as we have previously disclosed, we are continuing to evaluate strategic alternatives for our Sears Auto Center business, subject to board approval and other conditions. We have had discussions with third parties regarding a variety of opportunities, including partnerships. We also continue to reduce unprofitable stores as leases expire and in some cases will accelerate closings when it is economically prudent. We have announced the closure of approximately 130 underperforming stores in fiscal 2014 and may close additional stores during the remainder of the year. As previously indicated, when including the $500 million received in connection with the Lands’ End spin-off, we expect to raise in excess of $1.0 billion in proceeds from the monetization of non-core assets to Sears Holdings in fiscal 2014, helping to fund our transformation.

We cannot predict the outcome of the actions to generate liquidity to fund the transformation discussed above, or whether such actions would generate the expected liquidity to fund the transformation as currently planned. If results of operations deteriorate, and we are not able to generate enough funds from the above actions (or some combination of other actions), the availability under our domestic credit facility might be fully utilized, in particular during our peak borrowing period, and we would need to secure additional sources of funds. Moreover, if the borrowing base (as calculated pursuant to the indenture) falls below the principal amount of the notes plus the principal amount of any other indebtedness for borrowed money that is secured by liens on the collateral for the notes on the last day of any two consecutive quarters, it could trigger an obligation to repurchase notes in an amount equal to such deficiency. In addition, over the next six to 12 months, we intend to work with our lenders and others to evaluate our capital structure with a goal of achieving more long-term flexibility, and may take other actions as appropriate.

Our outstanding borrowings at August 2, 2014, August 3, 2013 and February 1, 2014 were as follows:

millions	August 2, 2014		August 3, 2013		February 1, 2014
Short-term borrowings:
Unsecured commercial paper	$	7	$	247	$	9
Secured borrowings	1,397		1,509		1,323
Long-term debt, including current portion:
Notes and debentures outstanding	2,566		1,582		2,571
Capitalized lease obligations	334		404		346
Total borrowings	$	4,304	$	3,742	$	4,249

60

SEARS HOLDINGS CORPORATION

13 and 26 Weeks Ended August 2, 2014 and August 3, 2013

We fund our peak sales season working capital needs through our domestic revolving credit facility and commercial paper markets.

	13 Weeks Ended						26 Weeks Ended
millions	August 2, 2014			August 3, 2013			August 2, 2014			August 3, 2013
Secured borrowings:
Maximum daily amount outstanding during the period	$	1,397		$	1,591		$	1,568		$	1,591
Average amount outstanding during the period	1,187			1,360			1,248			1,194
Amount outstanding at period-end	1,397			1,509			1,397			1,509
Weighted average interest rate	2.8		%	2.8		%	2.8		%	2.8		%
Unsecured commercial paper:
Maximum daily amount outstanding during the period	$	159		$	386		$	159		$	398
Average amount outstanding during the period	43			295			36			332
Amount outstanding at period-end	7			247			7			247
Weighted average interest rate	2.5		%	2.7		%	2.5		%	2.7		%

Domestic Credit Agreement

During the first quarter of 2011, Sears Roebuck Acceptance Corp. ("SRAC"), Kmart Corporation (together with SRAC, the "Borrowers") and Holdings entered into an amended credit agreement (the "Domestic Credit Agreement"). The Domestic Credit Agreement provides for a $3.275 billion asset-based revolving credit facility (the "Revolving Facility") with a $1.5 billion letter of credit sub-limit. On October 2, 2013, Holdings and the Borrowers entered into a First Amendment (the "Amendment") to the Domestic Credit Agreement with a syndicate of lenders. Pursuant to the Amendment, the Borrowers borrowed $1.0 billion under a senior secured term loan facility (the "Term Loan").

Advances under the Domestic Credit Agreement bear interest at a rate equal to, at the election of the Borrowers, either the London Interbank Offered Rate ("LIBOR") or a base rate, in either case plus an applicable margin. The Domestic Credit Agreement’s interest rates for LIBOR-based borrowings vary based on leverage in the range of LIBOR plus 2.0% to 2.5%. Interest rates for base rate-based borrowings vary based on leverage in the range of the applicable base rate plus 1.0% to 1.5%. Commitment fees are in a range of 0.375% to 0.625% based on usage. The Revolving Facility is in place as a funding source for general corporate purposes and is secured by a first lien on our domestic inventory and credit card and pharmacy receivables, and is subject to a borrowing base formula to determine availability. The Domestic Credit Agreement permits aggregate second lien indebtedness of up to $2.0 billion, of which $1.2 billion in second lien notes were outstanding at August 2, 2014, resulting in $760 million of permitted second lien indebtedness, subject to limitations imposed by a borrowing base requirement under the indenture that governs our 6 5/8% senior secured notes due 2018. The Revolving Facility is expected to expire in April 2016.

The Term Loan bears interest at a rate equal to, at the election of the Borrowers, either (1) LIBOR (subject to a 1.00% LIBOR floor) or (2) the highest of (x) the prime rate of the bank acting as agent of the syndicate of lenders, (y) the federal funds rate plus 0.50% and (z) the one-month LIBOR rate plus 1.00% (the highest of (x), (y) and (z), the "Base Rate"), plus an applicable margin for LIBOR loans of 4.50% and for Base Rate loans of 3.50%. Beginning February 2, 2014, the Borrowers are required to repay the Term Loan in quarterly installments of $2.5 million, with the remainder of the Term Loan maturing June 30, 2018. Beginning with the fiscal year ending January 2015, the Borrowers are also required to make certain mandatory repayments of the Term Loan from excess cash flow (as defined in the Domestic Credit Agreement). The Term Loan may be prepaid in whole or part without penalty, other than a 1.00% prepayment premium if the Borrowers enter into certain repricing transactions with respect to the Term Loan prior to October 2, 2014. The Term Loan is secured by the same collateral as the Revolving Facility on a pari passu basis with the Revolving Facility, and is guaranteed by the same subsidiaries of the Company that guarantee the Revolving Facility.

61

SEARS HOLDINGS CORPORATION

13 and 26 Weeks Ended August 2, 2014 and August 3, 2013

The Domestic Credit Agreement limits our ability to make restricted payments, including dividends and share repurchases, subject to specified exceptions that are available if, in each case, no event of default under the credit facility exists immediately before or after giving effect to the restricted payment. These include exceptions that require that projected availability under the credit facility, as defined, is at least 15% and an exception that requires that the restricted payment is funded from cash on hand and not from borrowings under the credit facility or from the proceeds of certain dividends or asset sales. The Domestic Credit Agreement also imposes various other requirements, which take effect if availability falls below designated thresholds, including a cash dominion requirement and a requirement that the fixed charge ratio at the last day of any quarter be not less than 1.0 to 1.0. If availability were to fall below 10%, the Company would not comply with the springing fixed charge coverage ratio covenant, and the lenders under our domestic credit facility could demand immediate payment in full of all amounts outstanding and terminate their obligations under the facility.

At August 2, 2014, August 3, 2013 and February 1, 2014, we had $1.4 billion, $1.5 billion and $1.3 billion, respectively, of Revolving Facility borrowings and $646 million, $680 million and $661 million, respectively, of letters of credit outstanding under the Revolving Facility. At August 2, 2014 and February 1, 2014, the amount available to borrow under the Revolving Facility was $240 million and $549 million, respectively, which reflects the effect of the springing fixed charge coverage ratio covenant and the borrowing base limitation. At August 3, 2013, the amount available to borrow was $759 million, which reflects the effect of the springing fixed charge coverage ratio covenant, while the borrowing base requirement had no effect on availability. The majority of the letters of credit outstanding are used to provide collateral for our insurance programs. At August 2, 2014 and February 1, 2014, we had $995 million and $1.0 billion, respectively, of borrowings under the Term Loan.

Senior Secured Notes

In October 2010, we sold $1.0 billion aggregate principal amount of senior secured notes (the "Notes"), which bear interest at 6 5/8% per annum and mature on October 15, 2018. Concurrent with the closing of the sale of the Notes, the Company sold $250 million aggregate principal amount of Notes to the Company's domestic pension plan in a private placement, of which approximately $110 million remains in the domestic pension plan. The Notes are guaranteed by certain subsidiaries of the Company and are secured by a security interest in certain assets consisting primarily of domestic inventory and credit card receivables (the "Collateral"). The lien that secures the Notes is junior in priority to the lien on such assets that secures obligations under the Domestic Credit Agreement, as well as certain other first priority lien obligations. The Company used the net proceeds of this offering to repay borrowings outstanding under a previous domestic credit agreement on the settlement date and to fund the working capital requirements of our retail businesses, capital expenditures and for general corporate purposes. The indenture under which the Notes were issued contains restrictive covenants that, among other things, (1) limit the ability of the Company and certain of its domestic subsidiaries to create liens and enter into sale and leaseback transactions and (2) limit the ability of the Company to consolidate with or merge into, or sell other than for cash or lease all or substantially all of its assets to, another person. The indenture also provides for certain events of default, which, if any were to occur, would permit or require the principal and accrued and unpaid interest on all the then outstanding notes to be due and payable immediately. Generally, the Company is required to offer to repurchase all outstanding Notes at a purchase price equal to 101% of the principal amount upon the occurrence of certain change of control triggering events. Moreover, if the borrowing base (as calculated pursuant to the indenture) falls below the principal amount of the Notes plus the principal amount of any other indebtedness for borrowed money that is secured by liens on the collateral for the Notes on the last day of any two consecutive quarters, it could trigger an obligation to repurchase notes in an amount equal to such deficiency. The Company may call the Notes at a premium based on the "Treasury Rate" as defined in the indenture, plus 50 basis points. On September 6, 2011, we completed our offer to exchange the Notes held by nonaffiliates for a new issue of substantially identical notes registered under the Securities Act of 1933, as amended.

Sears Canada Credit Agreement

In September 2010, Sears Canada entered into a five-year, $800 million Canadian senior secured revolving credit facility (the "Sears Canada Facility"). On May 28, 2014, Sears Canada announced that it had extended the term of the Sears Canada Facility (the "Amended Sears Canada Facility") to May 28, 2019 and reduced the total credit limit to $300 million Canadian.

62

SEARS HOLDINGS CORPORATION

13 and 26 Weeks Ended August 2, 2014 and August 3, 2013

The Amended Sears Canada Facility is available for Sears Canada's general corporate purposes and is secured by a first lien on inventory and credit card receivables. Availability under the Amended Sears Canada Facility is determined pursuant to a borrowing base formula based on inventory and credit card receivables, subject to certain limitations, up to a maximum availability of $300 million Canadian. At August 2, 2014, we had no borrowings outstanding under the Amended Sears Canada Facility, and at August 3, 2013 and February 1, 2014, we had no borrowings under the Sears Canada Facility. Availability under the Amended Sears Canada Facility was approximately $246 million ($268 million Canadian) at August 2, 2014, and availability under the Sears Canada Facility was approximately $530 million ($551 million Canadian) and $336 million ($374 million Canadian), respectively, at August 3, 2013 and February 1, 2014. The borrowing base formula may be reduced by reserves currently estimated by the Company to be approximately $122 million, which may be applied by the lenders at their discretion pursuant to the Amended Sears Canada Facility agreement. In 2013, as a result of judicial developments relating to the priorities of pension liability relative to certain secured obligations, Sears Canada provided additional security to the lenders by pledging certain real estate assets as collateral thereby partially reducing the potential reserve amount the lenders could apply. The potential additional reserve amount may increase or decrease in the future based on changes in estimated net pension liabilities.

Trade Creditor Matters

We have ongoing discussions concerning our liquidity and financial position with the vendor community and third parties that offer various credit protection services to our vendors. The topics discussed have included such areas as pricing, payment terms and ongoing business arrangements. As of the date of this report, we have not experienced any significant disruption in our access to merchandise or our operations.

Unsecured Commercial Paper

We borrow through the commercial paper markets. At August 2, 2014, August 3, 2013 and February 1, 2014, we had outstanding commercial paper borrowings of $7 million, $247 million and $9 million, respectively. ESL held $235 million of our commercial paper at August 3, 2013, including $143 million held by Edward S. Lampert. Neither ESL nor Edward S. Lampert held any of our commercial paper at August 2, 2014 or February 1, 2014. See Note 14 for further discussion of these borrowings.

Debt Ratings

Our corporate family debt ratings at August 2, 2014 appear in the table below:

Moody’s Investors Service	Standard & Poor’s Ratings Services	Fitch Ratings
Caa1	CCC+	CCC

Domestic Pension Plan Funding

In our Annual Report on Form 10-K for the fiscal year ended February 1, 2014, we disclosed that we expected our contributions to our domestic pension plans to be approximately $487 million in 2014 and $310 million in 2015. As of year-end 2013, we also expected contributions to our domestic pension plans to be approximately $270 million in 2016, $250 million in 2017, $215 million in 2018 and $75 million in 2019. On August 8, 2014, new legislation was enacted that amends existing funding requirements, which we expect will increase the discount rates we use to determine our pension liability resulting in lower liabilities and lower funding obligations. We expect this decrease will reduce contributions to our domestic pension plans in 2014 by $65 million, as well as reduce contributions by $60 million, $70 million and $60 million in fiscal years 2015, 2016 and 2017 respectively. The ultimate amount of pension contributions and timing could be affected by changes in the applicable regulations, or other regulatory actions, as well as financial market and investment performance.

Recent Accounting Pronouncements

See Part I, Item 1, "Financial Statements – Notes to Condensed Consolidated Financial Statements," Note 13 – "Recent Accounting Pronouncements," for information regarding new accounting pronouncements.

63

SEARS HOLDINGS CORPORATION

13 and 26 Weeks Ended August 2, 2014 and August 3, 2013

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION

Certain statements made in this Quarterly Report on Form 10-Q and in other public announcements by us contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are subject to risks and uncertainties that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by these forward-looking statements. Forward-looking statements include information concerning our future financial performance, business strategy, plans, goals and objectives. Statements preceded or followed by, or that otherwise include, the words “believes,” “expects,” “anticipates,” “intends,” “estimates,” “plans,” “forecast,” “is likely to” and similar expressions or future or conditional verbs such as “will,” “may” and “could” are generally forward-looking in nature and not historical facts. Such statements are based upon the current beliefs and expectations of the Company's management and are subject to significant risks and uncertainties. Actual results may differ materially from those set forth in the forward-looking statements.

The following factors, among others, could cause actual results to differ from those set forth in the forward-looking statements: our ability to offer merchandise and services that our customers want, including our proprietary brand products; our ability to successfully implement our integrated retail strategy to transform our business; our ability to successfully manage our inventory levels; initiatives to improve our liquidity through inventory management and other actions; competitive conditions in the retail and related services industries; worldwide economic conditions and business uncertainty, including the availability of consumer and commercial credit, changes in consumer confidence and spending, the impact of rising fuel prices, and changes in vendor relationships; vendors’ lack of willingness to provide acceptable payment terms or otherwise restricting financing to purchase inventory or services; possible limits on our access to our domestic credit facility, which is subject to a borrowing base limitation and a springing fixed charge coverage ratio covenant, capital markets and other financing sources, including additional second lien financings, with respect to which we do not have commitments from lenders; our ability to successfully achieve our plans to generate liquidity through potential transactions or otherwise; our ability to enter into or complete a transaction for our interest in Sears Canada or a transaction for our Sears Auto Centers business, in each case, on acceptable terms, on intended timetables or at all, the form or terms and conditions of any such transaction, and the impact of the evaluation and/or completion of any such transaction on our other businesses; our extensive reliance on computer systems, including legacy systems, to implement our integrated retail strategy, process transactions, summarize results, maintain customer, member, associate and Company data, and otherwise manage our business, which may be subject to disruptions or security breaches; potential liabilities in connection with the separation of Lands’ End, Inc.; the impact of seasonal buying patterns, including seasonal fluctuations due to weather conditions, which are difficult to forecast with certainty; our dependence on sources outside the United States for significant amounts of our merchandise; our reliance on third parties to provide us with services in connection with the administration of certain aspects of our business and the transfer of significant internal historical knowledge to such parties; impairment charges for goodwill and intangible assets or fixed-asset impairment for long-lived assets; our ability to attract, motivate and retain key executives and other associates; our ability to protect or preserve the image of our brands; the outcome of pending and/or future legal proceedings, including product liability and qui tam claims and proceedings with respect to which the parties have reached a preliminary settlement; and the timing and amount of required pension plan funding which is dependent upon many factors, including returns on invested assets, the discount rates used to determine pension obligations and/or changes in regulations or other regulatory action.

Certain of these and other factors are discussed in more detail in our filings with the Securities and Exchange Commission and the Annual Report on Form 10-K of Sears Holdings Corporation for the fiscal year ended February 1, 2014, which may be accessed through the Commission's website at www.sec.gov.

While we believe that our forecasts and assumptions are reasonable, we caution that actual results may differ materially. We intend the forward-looking statements to speak only as of the time made and do not undertake to update or revise them as more information becomes available, except as required by law.

Item 3. Quantitative and Qualitative Disclosures about Market Risk

We face market risk exposure in the form of interest rate risk and foreign currency risk. These market risks arise from our derivative financial instruments and debt obligations.

64

SEARS HOLDINGS CORPORATION

13 and 26 Weeks Ended August 2, 2014 and August 3, 2013

Interest Rate Risk

We manage interest rate risk through the use of fixed and variable-rate funding. All debt securities are considered non-trading. At August 2, 2014, 56% of our debt portfolio was variable rate. Based on the size of this variable rate debt portfolio at August 2, 2014, which totaled approximately $2.4 billion, an immediate 100 basis point change in interest rates would have affected annual pretax funding costs by $24 million. These estimates do not take into account the effect on income resulting from invested cash or the returns on assets being funded. These estimates also assume that the variable rate funding portfolio remains constant for an annual period and that the interest rate change occurs at the beginning of the period.

Foreign Currency Risk

At August 2, 2014, we had foreign currency forward contracts outstanding, totaling $300 million Canadian notional value and with a remaining life of 0.1 years, designed to hedge our net investment in Sears Canada against adverse changes in exchange rates. The aggregate fair value of the forward contracts at August 2, 2014 was a liability of $(0.3) million. A hypothetical 1% adverse movement in the level of the Canadian exchange rate relative to the U.S. dollar at August 2, 2014, with all other variables held constant, would have resulted in a fair value of these contracts of a liability of approximately $(3) million at August 2, 2014, a decrease of $2.7 million. Certain of our currency forward contracts require collateral be posted in the event our liability under such contracts reaches a predetermined threshold. Cash collateral posted under these contracts is recorded as part of our accounts receivable balance. We had $1 million cash collateral posted under our contracts at August 2, 2014.

Sears Canada reduces its foreign exchange risk with respect to U.S. dollar denominated assets and liabilities and purchases of goods or services by entering into foreign exchange forward contracts. At August 2, 2014, these contracts had a notional value of $205 million. The fair value of the forward contracts at August 2, 2014 was approximately $4 million. A hypothetical 1% adverse movement in the level of the Canadian exchange rate relative to the U.S. dollar at August 2, 2014, with all other variables held constant, would have resulted in a fair value for these contracts of approximately $2 million at August 2, 2014, a decrease of $2 million.

Counterparty Credit Risk

We actively manage the risk of nonpayment by our derivative counterparties by limiting our exposure to individual counterparties based on credit ratings, value at risk and maturities. The counterparties to these instruments are major financial institutions with investment grade credit ratings or better at August 2, 2014, August 3, 2013 and February 1, 2014.

Item 4. Controls and Procedures

Our management, with the participation of our principal executive and financial officers, conducted an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures, as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), as of the end of the period covered by this report (the “Evaluation Date”). Based on this evaluation, the principal executive and financial officers concluded that, as of the Evaluation Date, our disclosure controls and procedures were effective in ensuring that information required to be disclosed by us in the reports that we file or submit under the Exchange Act (i) is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and (ii) is accumulated and communicated to our management, including our principal executive and financial officers, as appropriate to allow timely decisions regarding required disclosure.

In addition, based on that evaluation, no changes in our internal control over financial reporting have occurred during our last fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

65

SEARS HOLDINGS CORPORATION

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

Item 103 of SEC Regulation S-K requires that we disclose legal proceedings to which the Company and a governmental authority is a party and that arise under laws dealing with the discharge of materials into the environment or the protection of the environment, if the proceeding reasonably involves potential monetary sanctions of $100,000 or more. Disclosure also is required as to any such proceedings known by us to be contemplated by governmental authorities. In that connection, we note that we have received a notice of violation from the California Department of Pesticide Regulation ("DPR") alleging that Kmart stores located in California sold certain products without proper registration with DPR. The parties are currently negotiating toward a resolution of this matter. We also note that we have received a notice of violation from the California Air Resource Board alleging that certain non-compliant products were sold in California. The parties are currently negotiating toward a resolution of this matter.

See Part I, Item 1, "Financial Statements—Notes to Condensed Consolidated Financial Statements," Note 12—"Legal Proceedings," for additional information regarding legal proceedings, which information is incorporated herein by this reference.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

The following table provides information about shares of common stock we acquired during the second quarter of 2014. During the 13 weeks ended August 2, 2014, we did not repurchase any shares of our common stock under our common share repurchase program. At August 2, 2014, we had approximately $504 million of remaining authorization under the program.

	Total Number of Shares Purchased(1)	Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Program(2)	Average Price Paid per Share for Publicly Announced Program		Approximate Dollar Value of Shares that May Yet Be Purchased Under the Program
May 4, 2014 to May 31, 2014	—	$	—	—	$	—
June 1, 2014 to July 5, 2014	5,784	39.21		—	—
July 6, 2014 to August 2, 2014	232	37.27		—	—
Total	6,016	$	39.14	—	$	—	$	503,907,832

⁽¹⁾  Consists entirely of 6,016 shares acquired from associates to meet withholding tax requirements from the vesting of restricted stock.

⁽²⁾  Our common share repurchase program was initially announced on September 14, 2005 and has a total authorization since inception of the program of $6.5 billion, including the authorizations to purchase up to an additional $500 million of common stock on each of December 17, 2009 and May 2, 2011. The program has no stated expiration date.

The Domestic Credit Agreement limits our ability to make restricted payments, including dividends and share repurchases, subject to specified exceptions that are available if, in each case, no event of default under the credit facility exists immediately before or after giving effect to the restricted payment. These include exceptions that require that projected availability under the credit facility, as defined, is at least 15% and an exception that requires that the restricted payment is funded from cash on hand and not from borrowings under the credit facility. The Domestic Credit Agreement also imposes various other requirements, which take effect if availability falls below designated thresholds, including a cash dominion requirement and a requirement that the fixed charge ratio at the last day of any quarter be not less than 1.0 to 1.0.

Item 4. Mine Safety Disclosures

Not applicable.

66

SEARS HOLDINGS CORPORATION

Item 6. Exhibits

Certain of the agreements filed with or incorporated by reference into this report contain representations and warranties and other agreements and undertakings by us and third parties. These representations and warranties, agreements and undertakings have been made as of specific dates, may be subject to important qualifications and limitations agreed to by the parties to the agreement in connection with negotiating the terms of the agreement, and have been included in the agreement for the purpose of allocating risk between the parties to the agreement rather than to establish matters as facts. Any such representations and warranties, agreements, and undertakings have been made solely for the benefit of the parties to the agreement and should not be relied upon by any other person.

(a) Exhibits.

An Exhibit Index has been filed as part of this Report on Page E-1.

67

SEARS HOLDINGS CORPORATION

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

SEARS HOLDINGS CORPORATION
By:	/s/ ROBERT A. RIECKER
Name:	Robert A. Riecker
Title:	Vice President, Controller and Chief
	Accounting Officer
Date:	August 21, 2014

68

SEARS HOLDINGS CORPORATION

EXHIBIT INDEX

3.1	Restated Certificate of Incorporation (incorporated by reference to Exhibit 3.1 to Registrant's Current Report on Form 8-K, dated March 24, 2005, filed on March 24, 2005 (File No. 000-51217)).
3.2	Amended and Restated By-Laws (incorporated by reference to Exhibit 3.2 to Registrant's Current Report on Form 8-K, dated January 22, 2014, filed on January 24, 2014 (File No. 000-51217)).
*31.1	Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
*31.2	Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
*32	Certification of Chief Executive Officer and Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101	The following financial information from the Quarterly Report on Form 10-Q for the fiscal quarter ended August 2, 2014, formatted in XBRL (eXtensible Business Reporting Language) and furnished electronically herewith: (i) the Condensed Consolidated Statements of Operations (Unaudited) for the 13 and 26 Weeks Ended August 2, 2014 and August 3, 2013; (ii) the Condensed Consolidated Statements of Comprehensive Income (Loss) (Unaudited) for the 13 and 26 Weeks Ended August 2, 2014 and August 3, 2013 (iii) the Condensed Consolidated Balance Sheets (Unaudited) as of August 2, 2014, August 3, 2013 and February 1, 2014; (iv) the Condensed Consolidated Statements of Cash Flows (Unaudited) for the 26 Weeks Ended August 2, 2014 and August 3, 2013; (v) the Condensed Consolidated Statements of Equity (Unaudited) for the 26 Weeks Ended August 2, 2014 and August 3, 2013; and (vi) the Notes to the Condensed Consolidated Financial Statements (Unaudited).

___________________

* Filed herewith.

E-1

EX-31.1

EXHIBIT 31.1

CERTIFICATIONS

I, Edward S. Lampert, certify that:

1.	I have reviewed this quarterly report on Form 10-Q of Sears Holdings Corporation;
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.	The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c)	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d)	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: August 21, 2014

/s/ Edward S. Lampert       
Edward S. Lampert
Chairman of the Board and Chief Executive Officer
Sears Holdings Corporation

EX-31.2

EXHIBIT 31.2

CERTIFICATIONS

I, Robert A. Schriesheim, certify that:

1.	I have reviewed this quarterly report on Form 10-Q of Sears Holdings Corporation;
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.	The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c)	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d)	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: August 21, 2014

/s/ Robert A. Schriesheim           

Robert A. Schriesheim
Executive Vice President and Chief Financial Officer

Sears Holdings Corporation

EX-32

EXHIBIT 32

CERTIFICATION

Pursuant to 18 U.S.C. 1350 as adopted by Section 906 of the Sarbanes-Oxley Act of 2002

Each of the undersigned, Edward S. Lampert, Chairman of the Board and Chief Executive Officer of Sears Holdings Corporation (the “Company”) and Robert A. Schriesheim, Executive Vice President and Chief Financial Officer of the Company, has executed this certification in connection with the filing with the Securities and Exchange Commission of the Company's Quarterly Report on Form 10-Q for the fiscal quarter ended August 2, 2014 (the “Report”).

Each of the undersigned hereby certifies that:

1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

August 21, 2014

/s/ Edward S. Lampert

Edward S. Lampert

Chairman of the Board and Chief Executive Officer

/s/ Robert A. Schriesheim

Robert A. Schriesheim

Executive Vice President and

Chief Financial Officer

XML

BORROWINGS (Wholly owned Insurance Subsidiary and Intercompany Securities) (Details) (USD $) In Billions, unless otherwise specified	May 31, 2006	Nov. 30, 2003	Nov. 30, 2003 Subsidiaries Store	Aug. 02, 2014 Securitized trademark rights	Aug. 02, 2014 Securitized real estate assets
Debt Instrument [Line Items]
Number of stores			125
Mortgage-backed securities owned		$ 1.3
Asset-backed securities issued	1.8
Carrying Amount Of Asset Securitized				$ 1.0	$ 0.7

XML

Other Long-Term Liabilities (Detail) (USD $) In Millions, unless otherwise specified	Aug. 02, 2014	Feb. 01, 2014	Aug. 03, 2013
Supplemental Financial Information Disclosure [Abstract]
Unearned revenues	$ 836	$ 836	$ 858
Self-insurance reserves	691	686	705
Other	480	486	518
Total	$ 2,007	$ 2,008	$ 2,081

XML

EQUITY (Components of Accumulated Other Comprehensive Loss) (Detail) (USD $) In Millions, unless otherwise specified	Aug. 02, 2014	Feb. 01, 2014	Aug. 03, 2013
Stockholders' Equity Note [Abstract]
Accumulated other comprehensive income (loss) attributable to noncontrolling interest	$ 42	$ (53)	$ (71)
Pension and postretirement adjustments (net of tax of $(0), $(442) and $(492), respectively)	(975)	(1,036)	(1,319)
Cumulative unrealized derivative gain (loss) (net of tax of $(0), $5 and $0, respectively)	0	2	0
Currency translation adjustments (net of tax of $(0), $(34) and $(26), respectively)	(74)	(83)	(66)
Accumulated other comprehensive loss	$ (1,049)	$ (1,117)	$ (1,385)

XML

RELATED PARTY DISCLOSURE - Additional Information (Detail) (USD $) In Millions, unless otherwise specified	1 Months Ended	6 Months Ended			1 Months Ended						1 Months Ended				3 Months Ended	6 Months Ended	3 Months Ended		6 Months Ended			6 Months Ended										6 Months Ended
	Oct. 31, 2010	Aug. 02, 2014	Feb. 01, 2014	Aug. 03, 2013	Oct. 31, 2010 Senior Secured Note [Member]	Aug. 02, 2014 Senior Secured Note [Member]	Aug. 02, 2014 Esl Investments Inc [Member]	Feb. 01, 2014 Esl Investments Inc [Member]	Aug. 03, 2013 Esl Investments Inc [Member]	Jan. 26, 2012 Esl Investments Inc [Member]	Oct. 31, 2010 Esl Investments Inc [Member] Senior Secured Note [Member]	Feb. 01, 2014 Esl Investments Inc [Member] Senior Secured Note [Member]	Feb. 01, 2014 Esl Investments Inc [Member] Unsecured Senior Notes	Aug. 03, 2013 Esl Investments Inc [Member] Unsecured Senior Notes	Aug. 02, 2014 Lands' End, Inc. [Member]	Aug. 02, 2014 Lands' End, Inc. [Member]	Aug. 02, 2014 Sears Hometown and Outlet Stores, Inc. [Member]	Aug. 03, 2013 Sears Hometown and Outlet Stores, Inc. [Member]	Aug. 02, 2014 Sears Hometown and Outlet Stores, Inc. [Member]	Aug. 03, 2013 Sears Hometown and Outlet Stores, Inc. [Member]	Feb. 01, 2014 Sears Hometown and Outlet Stores, Inc. [Member]	Aug. 02, 2014 Sears Holdings Corporation [Member] Esl Investments Inc [Member]	Aug. 02, 2014 Sears Roebuck Acceptance Corp [Member] Day	Aug. 03, 2013 Sears Roebuck Acceptance Corp [Member] Day	Aug. 02, 2014 Sears Roebuck Acceptance Corp [Member] Maximum	Aug. 02, 2014 Sears Roebuck Acceptance Corp [Member] Esl Investments Inc [Member]	Feb. 01, 2014 Sears Roebuck Acceptance Corp [Member] Esl Investments Inc [Member]	Aug. 03, 2013 Sears Roebuck Acceptance Corp [Member] Esl Investments Inc [Member]	Aug. 02, 2014 Sears Roebuck Acceptance Corp [Member] Edward S Lampert [Member]	Feb. 01, 2014 Sears Roebuck Acceptance Corp [Member] Edward S Lampert [Member]	Aug. 03, 2013 Sears Roebuck Acceptance Corp [Member] Edward S Lampert [Member]	Aug. 02, 2014 Sears Canada [Member] Esl Investments Inc [Member]	Aug. 02, 2014 Sears Hometown and Outlet Stores, Inc. [Member] Esl Investments Inc [Member]	Aug. 02, 2014 Lands' End, Inc. [Member] Esl Investments Inc [Member]
Related Party Transaction [Line Items]
Percentage of ownership in Sears outstanding common stock																						48.00%										28.00%	47.00%	49.00%
Due from Related Parties, Current															$ 3	$ 3	$ 84	$ 77	$ 84	$ 77	$ 68
Revenue from Related Parties															18	24	441	451	854	885
Related Party Transaction, Expenses from Transactions with Related Party															3	4	27	24	55	63
Document Fiscal Year Focus		2014
Weighted average of maturity period																							30.7	30.6
Interest rate per annum on unsecured commercial paper																							2.78%	2.78%
Commercial Paper, Weighted Average Principal Amount Outstanding																							25.3	273.0
Unsecured commercial paper		7	9	247																					150	0	0	235	0	0	143
Unsecured commercial paper interest expense																							0.4
Debt Instrument, Face Amount					1,000	1,240						95	3	3
Subsidiary notes																										3	3	3
Secured Long-term Debt, Noncurrent																										205	95	95
Senior secured note, interest rate	6.625%				6.625%						6.625%
Undivided participating interest in rights and obligations										80.00%
Participation interest in receivables							$ 0	$ 80	$ 97
Related Party Receivables, Repayment Term																			10 days

XML

Store Closing Cost Accruals (Detail) (USD $) In Millions, unless otherwise specified	3 Months Ended				6 Months Ended				9 Months Ended
	Aug. 02, 2014		Aug. 03, 2013		Aug. 02, 2014		Aug. 03, 2013		Feb. 01, 2014
Restructuring Cost and Reserve [Line Items]
Restructuring Charges	$ (45)		$ (11)		$ (69)		$ (33)
Document Fiscal Year Focus					2014
Gain (Loss) on Disposition of Property Plant Equipment, Excluding Oil and Gas Property and Timber Property	34		241		80		255
Beginning Balance					199
Restructuring Reserve, Period Increase (Decrease)	41								74
Restructuring Reserve Other									2
Payments/utilizations	(65)								(34)
Ending Balance	175		157		175		157		199
Severance Costs
Restructuring Cost and Reserve [Line Items]
Restructuring Charges	(9)		(2)	[1]	(15)	[1]	(6)	[1]
Beginning Balance					63
Restructuring Reserve, Period Increase (Decrease)									53
Restructuring Reserve Other									0
Payments/utilizations	(39)								(13)
Ending Balance	39		23		39		23		63
Lease Termination Costs
Restructuring Cost and Reserve [Line Items]
Restructuring Charges	(15)	[1]	3	[1]	(18)	[1]	7	[1]
Beginning Balance					119
Restructuring Reserve, Period Increase (Decrease)	19								10
Restructuring Reserve Other									2
Payments/utilizations	(13)								(12)
Ending Balance	125		119		125		119		119
Other Charges
Restructuring Cost and Reserve [Line Items]
Restructuring Charges	(4)		(4)	[1]	(7)	[1]	(9)	[1]
Beginning Balance					17
Restructuring Reserve, Period Increase (Decrease)									11
Restructuring Reserve Other									0
Payments/utilizations	(13)								(9)
Ending Balance	$ 11		$ 15		$ 11		$ 15		$ 17

[1] Recorded within Selling and administrative on the Condensed Consolidated Statements of Operations. Lease termination costs are net of estimated sublease income, and include the reversal of closed store reserves for which the lease agreement has been terminated and the reversal of deferred rent balances related to closed stores.

XML

BASIS OF PRESENTATION - Additional Information (Detail) (USD $) In Millions, unless otherwise specified	3 Months Ended		6 Months Ended					6 Months Ended						6 Months Ended
	Aug. 02, 2014	Aug. 03, 2013	Aug. 02, 2014	Aug. 03, 2013	Feb. 01, 2014	Aug. 02, 2014 United States Full Line Retail Stores [Member] Store	Aug. 02, 2014 Sears Canada Full Line And Specialty Retail Stores Store	Aug. 02, 2014 Sears Domestic	Feb. 01, 2014 Sears Domestic	Aug. 02, 2014 Sears Canada [Member]	Apr. 04, 2014 Lands' End, Inc. [Member]	Nov. 02, 2013 Secured Debt [Member] Term Loan [Member]	Apr. 04, 2014 Secured Debt [Member] Term Loan [Member] Lands' End, Inc. [Member]	Aug. 02, 2014 Lands' End, Inc. [Member]	Aug. 02, 2014 Lands' End, Inc. [Member] Sears Domestic
Significant Accounting Policies [Line Items]
Intangible Assets, Net (Excluding Goodwill)	$ 2,302	$ 2,864	$ 2,302	$ 2,864	$ 2,850			$ 2,106	$ 2,651
Indefinite-lived Intangible Assets, Written off Related to Sale of Business Unit														531	531
Amortization expense and other			(17)					(14)
Goodwill, Written off Related to Sale of Business Unit														110
Goodwill	269	379	269	379	379			269	379
Number of stores						1,870	432
Percentage of ownership interest										51.00%
Depreciation expense	147	181	297	361
Line of Credit Facility, Maximum Borrowing Capacity											175
Debt Instrument, Face Amount												1,000	515
Expected Cash Dividends Paid to Parent Company by Consolidated Subsidiaries											$ 500

XML

Condensed Consolidating Balance Sheet (Detail) (USD $) In Millions, unless otherwise specified	Aug. 02, 2014		Feb. 01, 2014		Aug. 03, 2013		Feb. 02, 2013
Current assets
Cash and cash equivalents	$ 829		$ 1,028		$ 671		$ 609
Intercompany receivables	0		0		0
Accounts receivable	516	[1]	553	[1]	641	[1]
Merchandise inventories	6,383		7,034		7,708
Prepaid expenses and other current assets	429		344		480
Total current assets	8,157		8,959		9,500
Total property and equipment, net	5,091		5,394		5,786
Goodwill and intangible assets	2,571		3,229		3,243
Other assets	619		679		749
Investment in subsidiaries	0		0		0
TOTAL ASSETS	16,438		18,261		19,278
Current liabilities
Short-term borrowings	1,404	[2]	1,332	[2]	1,756	[2]
Current portion of long-term debt and capitalized lease obligations	85		83		75
Merchandise payables	2,506		2,496		2,903
Intercompany payables	0		0		0
Short-term deferred tax liabilities	484		387		382
Other current liabilities	3,699		3,887		3,844
Total current liabilities	8,178		8,185		8,960
Long-term debt and capitalized lease obligations	2,815	[3]	2,834	[3]	1,911	[3]
Pension and postretirement benefits	1,721		1,942		2,539
Long-term deferred tax liabilities	798		1,109		963
Other long-term liabilities	2,007		2,008		2,081
Total Liabilities	15,519		16,078		16,454
EQUITY
Shareholder's equity	512		1,739		2,360
Noncontrolling interest	407		444		464
Total Equity	919		2,183		2,824		3,172
TOTAL LIABILITIES AND EQUITY	16,438		18,261		19,278
Parent
Current assets
Cash and cash equivalents	0		0		0		0
Intercompany receivables	0		0		0
Accounts receivable	0		0		0
Merchandise inventories	0		0		0
Prepaid expenses and other current assets	43		44		92
Total current assets	43		44		92
Total property and equipment, net	0		0		0
Goodwill and intangible assets	0		0		0
Other assets	12		13		15
Investment in subsidiaries	13,638		14,743		15,822
TOTAL ASSETS	13,693		14,800		15,929
Current liabilities
Short-term borrowings	0		0		0
Current portion of long-term debt and capitalized lease obligations	0		0		0
Merchandise payables	0		0		0
Intercompany payables	12,112		12,103		12,442
Short-term deferred tax liabilities	2		2		3
Other current liabilities	25		26		26
Total current liabilities	12,139		12,131		12,471
Long-term debt and capitalized lease obligations	1,238		1,238		1,237
Pension and postretirement benefits	0		0		0
Long-term deferred tax liabilities	0		0		0
Other long-term liabilities	0		0		0
Total Liabilities	13,377		13,369		13,708
EQUITY
Shareholder's equity	316		1,431		2,221
Noncontrolling interest	0		0		0
Total Equity	316		1,431		2,221
TOTAL LIABILITIES AND EQUITY	13,693		14,800		15,929
Guarantor Subsidiaries
Current assets
Cash and cash equivalents	565		537		336		320
Intercompany receivables	0		0		0
Accounts receivable	397		425		530
Merchandise inventories	5,783		6,356		6,856
Prepaid expenses and other current assets	971		873		1,093
Total current assets	7,716		8,191		8,815
Total property and equipment, net	3,680		3,906		4,241
Goodwill and intangible assets	288		944		955
Other assets	427		240		227
Investment in subsidiaries	25,474		25,303		25,301
TOTAL ASSETS	37,585		38,584		39,539
Current liabilities
Short-term borrowings	1,404		1,332		1,756
Current portion of long-term debt and capitalized lease obligations	72		70		60
Merchandise payables	2,239		2,213		2,530
Intercompany payables	14,257		13,781		13,645
Short-term deferred tax liabilities	504		408		412
Other current liabilities	2,362		2,412		2,405
Total current liabilities	20,838		20,216		20,808
Long-term debt and capitalized lease obligations	3,805		3,781		2,923
Pension and postretirement benefits	1,480		1,681		2,150
Long-term deferred tax liabilities	0		128		8
Other long-term liabilities	794		805		826
Total Liabilities	26,917		26,611		26,715
EQUITY
Shareholder's equity	10,668		11,973		12,824
Noncontrolling interest	0		0		0
Total Equity	10,668		11,973		12,824
TOTAL LIABILITIES AND EQUITY	37,585		38,584		39,539
Non-Guarantor Subsidiaries
Current assets
Cash and cash equivalents	264		491		335		289
Intercompany receivables	26,369		25,884		26,087
Accounts receivable	119		128		111
Merchandise inventories	600		678		852
Prepaid expenses and other current assets	451		375		470
Total current assets	27,803		27,556		27,855
Total property and equipment, net	1,411		1,488		1,545
Goodwill and intangible assets	2,283		2,285		2,288
Other assets	2,742		2,603		2,905
Investment in subsidiaries	0		0		0
TOTAL ASSETS	34,239		33,932		34,593
Current liabilities
Short-term borrowings	0		0		0
Current portion of long-term debt and capitalized lease obligations	13		13		15
Merchandise payables	267		283		373
Intercompany payables	0		0		0
Short-term deferred tax liabilities	0		0		0
Other current liabilities	2,325		2,374		2,555
Total current liabilities	2,605		2,670		2,943
Long-term debt and capitalized lease obligations	70		76		101
Pension and postretirement benefits	241		261		389
Long-term deferred tax liabilities	1,006		955		889
Other long-term liabilities	1,466		1,453		1,508
Total Liabilities	5,388		5,415		5,830
EQUITY
Shareholder's equity	28,851		28,517		28,763
Noncontrolling interest	0		0		0
Total Equity	28,851		28,517		28,763
TOTAL LIABILITIES AND EQUITY	34,239		33,932		34,593
Eliminations
Current assets
Cash and cash equivalents	0		0		0		0
Intercompany receivables	(26,369)		(25,884)		(26,087)
Accounts receivable	0		0		0
Merchandise inventories	0		0		0
Prepaid expenses and other current assets	(1,036)		(948)		(1,175)
Total current assets	(27,405)		(26,832)		(27,262)
Total property and equipment, net	0		0		0
Goodwill and intangible assets	0		0		0
Other assets	(2,562)		(2,177)		(2,398)
Investment in subsidiaries	(39,112)		(40,046)		(41,123)
TOTAL ASSETS	(69,079)		(69,055)		(70,783)
Current liabilities
Short-term borrowings	0		0		0
Current portion of long-term debt and capitalized lease obligations	0		0		0
Merchandise payables	0		0		0
Intercompany payables	(26,369)		(25,884)		(26,087)
Short-term deferred tax liabilities	(22)		(23)		(33)
Other current liabilities	(1,013)		(925)		(1,142)
Total current liabilities	(27,404)		(26,832)		(27,262)
Long-term debt and capitalized lease obligations	(2,298)		(2,261)		(2,350)
Pension and postretirement benefits	0		0		0
Long-term deferred tax liabilities	(208)		26		66
Other long-term liabilities	(253)		(250)		(253)
Total Liabilities	(30,163)		(29,317)		(29,799)
EQUITY
Shareholder's equity	(39,323)		(40,182)		(41,448)
Noncontrolling interest	407		444		464
Total Equity	(38,916)		(39,738)		(40,984)
TOTAL LIABILITIES AND EQUITY	$ (69,079)		$ (69,055)		$ (70,783)

[1] Includes $84 million, $77 million and $68 million at August 2, 2014, August 3, 2013 and February 1, 2014, respectively, of net amounts receivable from SHO.

[2] Includes $235 million of unsecured commercial paper held by ESL and its affiliates at August 3, 2013. ESL and its affiliates held none of our commercial paper at August 2, 2014 or February 1, 2014.

[3] Includes $205 million of senior secured notes held by ESL and its affiliates at August 2, 2014, and $95 million at both August 3, 2013, and February 1, 2014, and $3 million of subsidiary notes held by ESL and its affiliates at August 2, 2014, August 3, 2013, and February 1, 2014.

XML

BORROWINGS (Tables)

6 Months Ended

Aug. 02, 2014

Debt Disclosure [Abstract]

Total Borrowings

Total borrowings were as follows:

millions	August 2, 2014		August 3, 2013		February 1, 2014
Short-term borrowings:
Unsecured commercial paper	$	7	$	247	$	9
Secured borrowings	1,397		1,509		1,323
Long-term debt, including current portion:
Notes and debentures outstanding	2,566		1,582		2,571
Capitalized lease obligations	334		404		346
Total borrowings	$	4,304	$	3,742	$	4,249

XML

BENEFIT PLANS Summary of Components of Total Net Periodic Benefit Expense for Retirement Plans (Detail) (USD $) In Millions, unless otherwise specified	3 Months Ended		6 Months Ended
	Aug. 02, 2014	Aug. 03, 2013	Aug. 02, 2014	Aug. 03, 2013
Components of net periodic expense:
Interest cost	$ 82	$ 75	$ 151	$ 150
Expected return on plan assets	(92)	(77)	(169)	(154)
Amortization of experience losses	31	49	62	97
Net periodic expense	$ 21	$ 47	$ 44	$ 93

XML

Fair Value Measurement Amounts for Other Financial Assets and Liabilities Recorded in Condensed Consolidated Balance Sheets at Fair Value (Detail) (USD $) In Millions, unless otherwise specified	Aug. 02, 2014		Feb. 01, 2014		Aug. 03, 2013
Fair Value Measurements [Line Items]
Cash equivalents	$ 55	[1]	$ 346	[1]	$ 211	[1]
Restricted cash	10	[2]	10	[2]	10	[2]
Foreign Currency Contract, Asset, Fair Value Disclosure	4	[3]	8	[3]	1	[3]
Foreign Currency Contracts, Liability, Fair Value Disclosure					(1)	[4]
Total	69		364		221
Level 1
Fair Value Measurements [Line Items]
Cash equivalents	55	[1]	346	[1]	211	[1]
Restricted cash	10	[2]	10	[2]	10	[2]
Foreign Currency Contract, Asset, Fair Value Disclosure	0	[3]	0	[3]	0	[3]
Foreign Currency Contracts, Liability, Fair Value Disclosure					0	[4]
Total	65		356		221
Level 2
Fair Value Measurements [Line Items]
Cash equivalents	0	[1]	0	[1]	0	[1]
Restricted cash	0	[2]	0	[2]	0	[2]
Foreign Currency Contract, Asset, Fair Value Disclosure	4	[3]	8	[3]	1	[3]
Foreign Currency Contracts, Liability, Fair Value Disclosure					(1)	[4]
Total	4		8		0
Level 3
Fair Value Measurements [Line Items]
Cash equivalents	0	[1]	0	[1]	0	[1]
Restricted cash	0	[2]	0	[2]	0	[2]
Foreign Currency Contract, Asset, Fair Value Disclosure	0	[3]	0	[3]	0	[3]
Foreign Currency Contracts, Liability, Fair Value Disclosure					0	[4]
Total	$ 0		$ 0		$ 0

[1] Included within Cash and cash equivalents in our Condensed Consolidated Balance Sheets.

[2] Included within Restricted cash in our Condensed Consolidated Balance Sheets.

[3] Included within Prepaid expenses and other current assets in our Condensed Consolidated Balance Sheets.

[4] Included within Accrued expenses and other current liabilities in our Condensed Consolidated Balance Sheets.

XML

BORROWINGS (Senior Secured Notes) (Details) (USD $)	1 Months Ended				1 Months Ended				1 Months Ended		1 Months Ended
	Oct. 31, 2010	Aug. 02, 2014	Feb. 01, 2014	Aug. 03, 2013	Oct. 31, 2010 Senior Secured Note [Member]	Aug. 02, 2014 Senior Secured Note [Member]	Aug. 02, 2014 SHC Domestic, Pension Plans Senior Secured Note [Member]	Oct. 31, 2010 SHC Domestic, Pension Plans Senior Secured Note [Member]	Oct. 31, 2010 Esl Investments Inc [Member] Senior Secured Note [Member]	Feb. 01, 2014 Esl Investments Inc [Member] Senior Secured Note [Member]	Oct. 31, 2010 Treasury Rate Senior Secured Note [Member]	Aug. 02, 2014 Secured Debt [Member] Term Loan [Member]	Nov. 02, 2013 Secured Debt [Member] Term Loan [Member]	Aug. 02, 2014 Securitized real estate assets	Aug. 02, 2014 Sears Roebuck Acceptance Corp [Member] Esl Investments Inc [Member]	Feb. 01, 2014 Sears Roebuck Acceptance Corp [Member] Esl Investments Inc [Member]	Aug. 03, 2013 Sears Roebuck Acceptance Corp [Member] Esl Investments Inc [Member]	Aug. 02, 2014 Sears Roebuck Acceptance Corp [Member] Edward S Lampert [Member]	Feb. 01, 2014 Sears Roebuck Acceptance Corp [Member] Edward S Lampert [Member]	Aug. 03, 2013 Sears Roebuck Acceptance Corp [Member] Edward S Lampert [Member]
Debt Instrument [Line Items]
Carrying Amount Of Asset Securitized														$ 700,000,000
Line of Credit Facility, Amount Outstanding		1,397,000,000	1,323,000,000	1,509,000,000
Fair value of long-term debt		2,300,000,000	2,300,000,000	1,500,000,000
Senior secured notes, interest rate	6.625%				6.625%				6.625%
Debt Instrument, Face Amount					1,000,000,000	1,240,000,000	110,000,000	250,000,000		95,000,000			1,000,000,000
Debt instrument maturity date					Oct. 15, 2018
Credit agreement, interest rates margin											0.50%
Unsecured commercial paper		7,000,000	9,000,000	247,000,000											0	0	235,000,000	0	0	143,000,000
Long-term Debt												$ 1,000,000,000

XML

INCOME TAXES - Additional Information (Detail) (USD $)	3 Months Ended		6 Months Ended			12 Months Ended
	Aug. 02, 2014	Aug. 03, 2013	Aug. 02, 2014	Aug. 03, 2013	Feb. 01, 2014	Feb. 01, 2014 Minimum	Feb. 01, 2014 Maximum
Income Taxes [Line Items]
Gross unrecognized tax benefits	$ 141,000,000	$ 142,000,000	$ 141,000,000	$ 142,000,000	$ 150,000,000
Unrecognized tax benefits that would, if recognized, impact effective tax rate	86,000,000		86,000,000
Decrease in gross unrecognized tax benefits due to federal and state audit settlements	0	9,000,000	9,000,000	19,000,000
Expected decrease in unrecognized tax benefits over the next 12 months	6,000,000		6,000,000
Interest and penalties recognized on balance sheet	53,000,000	51,000,000	53,000,000	51,000,000	53,000,000
Interest and penalties recognized, net of federal benefit	36,000,000	35,000,000	36,000,000	35,000,000	36,000,000
Net interest expense recognized in statement of income	1,000,000		3,000,000
Deferred tax asset operating loss ("NOL") carryforwards					1,200,000,000
Operating loss carryforwards expiration year						2019	2034
Credit carryforwards					721,000,000
Credit carryforwards expiration year						2015	2034
Deferred tax asset valuation allowance					$ 3,400,000,000
Effective Income Tax Rate Reconciliation, Percent			5.80%

XML

EQUITY - Additional Information (Detail) (USD $) In Millions, unless otherwise specified	3 Months Ended
	Aug. 02, 2014	Aug. 03, 2013	Feb. 01, 2014
Stockholders' Equity Note [Abstract]
Repurchase of common shares, shares	0	0
Remaining authorization to repurchase common shares under share repurchase program, value	$ 504
Accumulated other comprehensive income (loss) attributable to noncontrolling interest	$ 42	$ (71)	$ (53)

XML

BORROWINGS

6 Months Ended

Aug. 02, 2014

Debt Disclosure [Abstract]

BORROWINGS

BORROWINGS

Total borrowings were as follows:

millions	August 2, 2014		August 3, 2013		February 1, 2014
Short-term borrowings:
Unsecured commercial paper	$	7	$	247	$	9
Secured borrowings	1,397		1,509		1,323
Long-term debt, including current portion:
Notes and debentures outstanding	2,566		1,582		2,571
Capitalized lease obligations	334		404		346
Total borrowings	$	4,304	$	3,742	$	4,249

The fair value of long-term debt, excluding capitalized lease obligations, was $2.3 billion at August 2, 2014, $1.5 billion at August 3, 2013 and $2.3 billion at February 1, 2014. The fair value of our debt was estimated based on quoted market prices for the same or similar issues or on current rates offered to us for debt of the same remaining maturities. Our long-term debt instruments are valued using Level 2 measurements as defined in Note 4 to the Condensed Consolidated Financial Statements.

Debt Repurchase Authorization

In 2005, our Finance Committee of the Board of Directors authorized the repurchase, subject to market conditions and other factors, of up to $500 million of our outstanding indebtedness in open market or privately negotiated transactions. Our wholly owned finance subsidiary, Sears Roebuck Acceptance Corp. ("SRAC"), has repurchased $215 million of its outstanding notes. Holdings has repurchased $10 million of senior secured notes. The unused balance of this authorization is $275 million at August 2, 2014.

Unsecured Commercial Paper

We borrow through the commercial paper markets. At August 2, 2014, August 3, 2013 and February 1, 2014, we had outstanding commercial paper borrowings of $7 million, $247 million and $9 million, respectively. ESL held $235 million of our commercial paper at August 3, 2013, including $143 million held by Edward S. Lampert. Neither ESL nor Edward S. Lampert held any of our commercial paper at August 2, 2014 or February 1, 2014. See Note 14 for further discussion of these borrowings.

Domestic Credit Agreement

During the first quarter of 2011, SRAC, Kmart Corporation (together with SRAC, the "Borrowers") and Holdings entered into an amended credit agreement (the "Domestic Credit Agreement"). The Domestic Credit Agreement provides for a $3.275 billion asset-based revolving credit facility (the "Revolving Facility") with a $1.5 billion letter of credit sub-limit. On October 2, 2013, Holdings and the Borrowers entered into a First Amendment (the "Amendment") to the Domestic Credit Agreement with a syndicate of lenders. Pursuant to the Amendment, the Borrowers borrowed $1.0 billion under a senior secured term loan facility (the "Term Loan").

Advances under the Domestic Credit Agreement bear interest at a rate equal to, at the election of the Borrowers, either the London Interbank Offered Rate ("LIBOR") or a base rate, in either case plus an applicable margin. The Domestic Credit Agreement’s interest rates for LIBOR-based borrowings vary based on leverage in the range of LIBOR plus 2.0% to 2.5%. Interest rates for base rate-based borrowings vary based on leverage in the range of the applicable base rate plus 1.0% to 1.5%. Commitment fees are in a range of 0.375% to 0.625% based on usage. The Revolving Facility is in place as a funding source for general corporate purposes and is secured by a first lien on our domestic inventory and credit card and pharmacy receivables, and is subject to a borrowing base formula to determine availability. The Domestic Credit Agreement permits aggregate second lien indebtedness of up to $2.0 billion, of which $1.2 billion in second lien notes were outstanding at August 2, 2014, resulting in $760 million of permitted second lien indebtedness, subject to limitations imposed by a borrowing base requirement under the indenture that governs our 6 5/8% senior secured notes due 2018. The Revolving Facility is expected to expire in April 2016.

The Term Loan bears interest at a rate equal to, at the election of the Borrowers, either (1) LIBOR (subject to a 1.00% LIBOR floor) or (2) the highest of (x) the prime rate of the bank acting as agent of the syndicate of lenders, (y) the federal funds rate plus 0.50% and (z) the one-month LIBOR rate plus 1.00% (the highest of (x), (y) and (z), the "Base Rate"), plus an applicable margin for LIBOR loans of 4.50% and for Base Rate loans of 3.50%. Beginning February 2, 2014, the Borrowers are required to repay the Term Loan in quarterly installments of $2.5 million, with the remainder of the Term Loan maturing June 30, 2018. Beginning with the fiscal year ending January 2015, the Borrowers are also required to make certain mandatory repayments of the Term Loan from excess cash flow (as defined in the Domestic Credit Agreement). The Term Loan may be prepaid in whole or part without penalty, other than a 1.00% prepayment premium if the Borrowers enter into certain repricing transactions with respect to the Term Loan prior to October 2, 2014. The Term Loan is secured by the same collateral as the Revolving Facility on a pari passu basis with the Revolving Facility, and is guaranteed by the same subsidiaries of the Company that guarantee the Revolving Facility.

The Domestic Credit Agreement limits our ability to make restricted payments, including dividends and share repurchases, subject to specified exceptions that are available if, in each case, no event of default under the credit facility exists immediately before or after giving effect to the restricted payment. These include exceptions that require that projected availability under the credit facility, as defined, is at least 15% and an exception that requires that the restricted payment is funded from cash on hand and not from borrowings under the credit facility or from the proceeds of certain dividends or asset sales. The Domestic Credit Agreement also imposes various other requirements, which take effect if availability falls below designated thresholds, including a cash dominion requirement and a requirement that the fixed charge ratio at the last day of any quarter be not less than 1.0 to 1.0. If availability were to fall below 10%, the Company would not comply with the springing fixed charge coverage ratio covenant, and the lenders under our domestic credit facility could demand immediate payment in full of all amounts outstanding and terminate their obligations under the facility.

At August 2, 2014, August 3, 2013 and February 1, 2014, we had $1.4 billion, $1.5 billion and $1.3 billion, respectively, of Revolving Facility borrowings and $646 million, $680 million and $661 million, respectively, of letters of credit outstanding under the Revolving Facility. At August 2, 2014 and February 1, 2014, the amount available to borrow under the Revolving Facility was $240 million and $549 million, respectively, which reflects the effect of the springing fixed charge coverage ratio covenant and the borrowing base limitation. At August 3, 2013, the amount available to borrow was $759 million, which reflects the effect of the springing fixed charge coverage ratio covenant, while the borrowing base requirement had no effect on availability. The majority of the letters of credit outstanding are used to provide collateral for our insurance programs. At August 2, 2014 and February 1, 2014, we had $995 million and $1.0 billion, respectively, of borrowings under the Term Loan.

Senior Secured Notes

In October 2010, we sold $1.0 billion aggregate principal amount of senior secured notes (the "Notes"), which bear interest at 6 5/8% per annum and mature on October 15, 2018. Concurrent with the closing of the sale of the Notes, the Company sold $250 million aggregate principal amount of Notes to the Company's domestic pension plan in a private placement, of which approximately $110 million remains in the domestic pension plan. The Notes are guaranteed by certain subsidiaries of the Company and are secured by a security interest in certain assets consisting primarily of domestic inventory and credit card receivables (the "Collateral"). The lien that secures the Notes is junior in priority to the lien on such assets that secures obligations under the Domestic Credit Agreement, as well as certain other first priority lien obligations. The Company used the net proceeds of this offering to repay borrowings outstanding under a previous domestic credit agreement on the settlement date and to fund the working capital requirements of our retail businesses, capital expenditures and for general corporate purposes. The indenture under which the Notes were issued contains restrictive covenants that, among other things, (1) limit the ability of the Company and certain of its domestic subsidiaries to create liens and enter into sale and leaseback transactions and (2) limit the ability of the Company to consolidate with or merge into, or sell other than for cash or lease all or substantially all of its assets to, another person. The indenture also provides for certain events of default, which, if any were to occur, would permit or require the principal and accrued and unpaid interest on all the then outstanding notes to be due and payable immediately. Generally, the Company is required to offer to repurchase all outstanding Notes at a purchase price equal to 101% of the principal amount upon the occurrence of certain change of control triggering events. Moreover, if the borrowing base (as calculated pursuant to the indenture) falls below the principal amount of the Notes plus the principal amount of any other indebtedness for borrowed money that is secured by liens on the collateral for the Notes on the last day of any two consecutive quarters, it could trigger an obligation to repurchase notes in an amount equal to such deficiency. The Company may call the Notes at a premium based on the "Treasury Rate" as defined in the indenture, plus 50 basis points. On September 6, 2011, we completed our offer to exchange the Notes held by nonaffiliates for a new issue of substantially identical notes registered under the Securities Act of 1933, as amended.

Sears Canada Credit Agreement

In September 2010, Sears Canada entered into a five-year, $800 million Canadian senior secured revolving credit facility (the "Sears Canada Facility"). On May 28, 2014, Sears Canada announced that it had extended the term of the Sears Canada Facility (the "Amended Sears Canada Facility") to May 28, 2019 and reduced the total credit limit to $300 million Canadian.

The Amended Sears Canada Facility is available for Sears Canada's general corporate purposes and is secured by a first lien on inventory and credit card receivables. Availability under the Amended Sears Canada Facility is determined pursuant to a borrowing base formula based on inventory and credit card receivables, subject to certain limitations, up to a maximum availability of $300 million Canadian. At August 2, 2014, we had no borrowings outstanding under the Amended Sears Canada Facility, and at August 3, 2013 and February 1, 2014, we had no borrowings under the Sears Canada Facility. Availability under the Amended Sears Canada Facility was approximately $246 million ($268 million Canadian) at August 2, 2014, and availability under the Sears Canada Facility was approximately $530 million ($551 million Canadian) and $336 million ($374 million Canadian), respectively, at August 3, 2013 and February 1, 2014. The borrowing base formula may be reduced by reserves currently estimated by the Company to be approximately $122 million, which may be applied by the lenders at their discretion pursuant to the Amended Sears Canada Facility agreement. In 2013, as a result of judicial developments relating to the priorities of pension liability relative to certain secured obligations, Sears Canada provided additional security to the lenders by pledging certain real estate assets as collateral, thereby partially reducing the potential reserve amount the lenders could apply. The potential additional reserve amount may increase or decrease in the future based on changes in estimated net pension liabilities.

Wholly owned Insurance Subsidiary and Intercompany Securities

We have numerous types of insurable risks, including workers' compensation, product and general liability, automobile, warranty, asbestos and environmental claims and the extended service contracts we sell to our customers. In addition, we provide credit insurance to third party creditors of the Company to mitigate their credit risk with the Company. The associated risks are managed through Holdings' wholly owned insurance subsidiary, Sears Reinsurance Company Ltd. ("Sears Re"), a Bermuda Class 3 insurer.

In accordance with applicable insurance regulations, Sears Re holds marketable securities to support the insurance coverage it provides. Sears has utilized two securitization structures to issue specific securities in which Sears Re has invested its capital to fund its insurance obligations. In November 2003, Sears formed a Real Estate Mortgage Investment Conduit, or REMIC. The real estate associated with 125 Full-line stores was contributed to indirect wholly owned subsidiaries of Sears, and then leased back to Sears. The contributed stores were mortgaged and the REMIC issued to wholly owned subsidiaries of Sears (including Sears Re) $1.3 billion (par value) of securities (the "REMIC Securities") that are secured by the mortgages and collateral assignments of the store leases. Payments to the holders on the REMIC Securities are funded by the lease payments. In May 2006, a subsidiary of Holdings contributed the rights to use the Kenmore, Craftsman and DieHard trademarks in the U.S. and its possessions and territories to KCD IP, LLC, an indirect wholly owned subsidiary of Holdings. KCD IP, LLC has licensed the use of the trademarks to subsidiaries of Holdings, including Sears and Kmart. Asset-backed securities with a par value of $1.8 billion (the "KCD Securities") were issued by KCD IP, LLC and subsequently purchased by Sears Re, the collateral for which includes the trademark rights and royalty income. Payments to the holders on the KCD Securities are funded by the royalty payments. The issuers of the REMIC Securities and KCD Securities and the owners of these real estate and trademark assets are bankruptcy remote, special purpose entities that are indirect wholly owned subsidiaries of Holdings. Cash flows received from rental streams and licensing fee streams paid by Sears, Kmart, other affiliates and third parties, are used for the payment of fees and interest on these securities. In the fourth quarter of fiscal 2013, Holdings contributed all of the outstanding capital stock of Sears Re to SRe Holding Corporation, a direct wholly owned subsidiary of Holdings. Sears Re thereafter reduced its excess statutory capital through the distribution of all REMIC Securities held by it to SRe Holding Corporation. Since the inception of the REMIC and KCD IP, LLC, the REMIC Securities and the KCD Securities have been entirely held by our wholly owned consolidated subsidiaries. At August 2, 2014, August 3, 2013 and February 1, 2014, the net book value of the securitized trademark rights was approximately $1.0 billion. The net book value of the securitized real estate assets was approximately $0.7 billion at August 2, 2014, August 3, 2013 and February 1, 2014.

Trade Creditor Matters

We have ongoing discussions concerning our liquidity and financial position with the vendor community and third parties that offer various credit protection services to our vendors. The topics discussed have included such areas as pricing, payment terms and ongoing business arrangements. As of the date of this report, we have not experienced any significant disruption in our access to merchandise or our operations.

XML

SEARS CANADA - Additional Information (Detail) (Sears Canada [Member], USD $) In Millions, unless otherwise specified	3 Months Ended
	Aug. 02, 2014	Aug. 03, 2013	Aug. 03, 2013 Maximum	May 28, 2014 Revolving Credit Facility [Member]	Sep. 30, 2010 Revolving Credit Facility [Member]
Business Acquisition [Line Items]
Line of Credit Facility, Maximum Borrowing Capacity				$ 300	$ 800
Percentage of issued and outstanding common shares to be purchased for cancellation			5.00%
Number of common shares to be purchased for cancellation		5.1
Common shares acquired and cancelled	0
Percentage of ownership interest	51.00%
Shares of beneficial interest	52
Share Repurchase Program Expiration Date		May 23, 2014
Assets, Fair Value Disclosure	$ 765

XML

BENEFIT PLANS (Tables)

6 Months Ended

Aug. 02, 2014

Defined Benefit Pension Plans and Defined Benefit Postretirement Plans Disclosure [Abstract]

Summary of Components of Total Net Periodic Benefit Expense for Retirement Plans

The following table summarizes the components of total net periodic benefit expense, recorded within Selling and administrative on the Condensed Consolidated Statements of Operations, for our retirement plans:

	13 Weeks Ended						26 Weeks Ended
millions	August 2, 2014			August 3, 2013			August 2, 2014			August 3, 2013
Components of net periodic expense:
Interest cost	$	82		$	75		$	151		$	150
Expected return on plan assets	(92		)	(77		)	(169		)	(154		)
Amortization of experience losses	31			49			62			97
Net periodic expense	$	21		$	47		$	44		$	93

XML

EQUITY (Tables)

6 Months Ended

Aug. 02, 2014

Stockholders' Equity Note [Abstract]

Components of Accumulated Other Comprehensive Loss

The following table displays the components of accumulated other comprehensive loss:

millions	August 2, 2014			August 3, 2013			February 1, 2014
Pension and postretirement adjustments (net of tax of $(326), $(441) and $(328), respectively)	$	(975	)	$	(1,319	)	$	(1,036	)
Cumulative unrealized derivative gain (net of tax of $0 for all periods presented)	—			—			2
Currency translation adjustments (net of tax of $(37), $(40) and $(38), respectively)	(74		)	(66		)	(83		)
Accumulated other comprehensive loss	$	(1,049	)	$	(1,385	)	$	(1,117	)

Pension and postretirement adjustments relate to the net actuarial loss on our pension and postretirement plans recognized as a component of accumulated other comprehensive loss.

Accumulated other comprehensive loss attributable to noncontrolling interests at August 2, 2014, August 3, 2013 and February 1, 2014 was $42 million, $71 million and $53 million, respectively.

Income Tax Expense Allocated to Each Component of Other Comprehensive Income (Loss)

Income tax expense allocated to each component of other comprehensive income was as follows:

	13 Weeks Ended August 2, 2014									13 Weeks Ended August 3, 2013
millions	Before Tax Amount			Tax Expense			Net of Tax Amount			Before Tax Amount			Tax Expense			Net of Tax Amount
Other comprehensive income
Pension and postretirement adjustments(1)	$	37		$	(2	)	$	35		$	49		$	(1	)	$	48
Deferred loss on derivatives	(1		)	—			(1		)	—			—			—
Currency translation adjustments	3			—			3			(20		)	—			(20		)
Total other comprehensive income	$	39		$	(2	)	$	37		$	29		$	(1	)	$	28

	26 Weeks Ended August 2, 2014									26 Weeks Ended August 3, 2013
millions	Before Tax Amount			Tax Expense			Net of Tax Amount			Before Tax Amount			Tax (Expense) Benefit			Net of Tax Amount
Other comprehensive income
Pension and postretirement adjustments(1)	$	68		$	(3	)	$	65		$	97		$	(3	)	$	94
Deferred loss on derivatives	(2		)	—			(2		)	—			—			—
Currency translation adjustments	15			(1		)	14			(28		)	1			(27		)
Total other comprehensive income	$	81		$	(4	)	$	77		$	69		$	(2	)	$	67

⁽¹⁾  Included in the computation of net periodic benefit expense. See Note 8 to the Condensed Consolidated Financial Statements.

XML

GUARANTOR/NON-GUARANTOR SUBSIDIARY FINANCIAL INFORMATION - Additional Information (Detail) (USD $) In Millions, unless otherwise specified	3 Months Ended				6 Months Ended					3 Months Ended		6 Months Ended					3 Months Ended	6 Months Ended
	Aug. 02, 2014		Aug. 03, 2013		Aug. 02, 2014		Aug. 03, 2013		Feb. 01, 2014	Aug. 02, 2014 Guarantor Subsidiaries	Aug. 03, 2013 Guarantor Subsidiaries	Aug. 02, 2014 Guarantor Subsidiaries	Aug. 03, 2013 Guarantor Subsidiaries	Feb. 01, 2014 Guarantor Subsidiaries	Aug. 02, 2014 Senior Secured Note [Member]	Oct. 31, 2010 Senior Secured Note [Member]	Aug. 03, 2013 Lands' End, Inc. [Member]	Aug. 02, 2014 Lands' End, Inc. [Member]	Aug. 03, 2013 Lands' End, Inc. [Member]	Feb. 01, 2014 Lands' End, Inc. [Member]
Condensed Financial Statements, Captions [Line Items]
Debt Instrument, Maturity Year					2018
Senior secured notes, principal amount outstanding															$ 1,240	$ 1,000
Total assets	16,438		19,278		16,438		19,278		18,261	37,585	39,539	37,585	39,539	38,584			1,100		1,100	1,100
Total Liabilities	15,519		16,454		15,519		16,454		16,078	26,917	26,715	26,917	26,715	26,611			395		395	385
Merchandise sales and services	8,013	[1]	8,871	[1]	15,892	[1]	17,323	[1]		7,315	8,030	14,516	15,608				280	185	545
NET INCOME (LOSS) ATTRIBUTABLE TO HOLDINGS’ SHAREHOLDERS	$ (573)		$ (194)		$ (975)		$ (473)			$ (619)	$ (154)	$ (1,117)	$ (477)				$ 10	$ 5	$ 15

[1] Includes merchandise sales to Sears Hometown and Outlet Stores, Inc. ("SHO") of $383 million and $386 million for the 13 weeks ended August 2, 2014 and August 3, 2013, respectively and $741 million and $755 million for the 26 weeks ended August 2, 2014 and August 3, 2013, respectively. Pursuant to the terms of the separation, merchandise is sold to SHO at cost.

XML

STORE CLOSING COSTS, IMPAIRMENTS AND REAL ESTATE TRANSACTIONS - Additional Information (Detail) In Millions, unless otherwise specified	3 Months Ended		6 Months Ended			6 Months Ended	3 Months Ended	6 Months Ended			3 Months Ended				6 Months Ended		3 Months Ended		6 Months Ended		3 Months Ended		6 Months Ended		3 Months Ended				6 Months Ended					3 Months Ended		6 Months Ended				3 Months Ended				6 Months Ended				3 Months Ended				6 Months Ended				3 Months Ended
	Aug. 02, 2014 USD ($)	Aug. 03, 2013 USD ($)	Aug. 02, 2014 USD ($)	Aug. 03, 2013 USD ($)	Feb. 01, 2014 USD ($)	Aug. 02, 2014 Kmart USD ($)	Aug. 03, 2013 Sears Canada [Member] USD ($)	Aug. 02, 2014 Sears Domestic USD ($)	Aug. 03, 2013 Sears Full-Line and Kmart [Member] USD ($)	Aug. 03, 2013 United States Full Line Retail Stores [Member] Store	Aug. 02, 2014 Sears Canada [Member] USD ($)	Aug. 02, 2014 Sears Canada [Member] CAD	Aug. 03, 2013 Sears Canada [Member] USD ($)	Aug. 03, 2013 Sears Canada [Member] CAD	Aug. 02, 2014 Sears Canada [Member] USD ($)	Aug. 03, 2013 Sears Canada [Member] USD ($) Store	Aug. 02, 2014 Sears Domestic USD ($) Store	Aug. 03, 2013 Sears Domestic USD ($) Store	Aug. 02, 2014 Sears Domestic USD ($) Store	Aug. 03, 2013 Sears Domestic USD ($) Store	Aug. 02, 2014 Kmart USD ($) Store	Aug. 03, 2013 Kmart USD ($) Store	Aug. 02, 2014 Kmart USD ($) Store	Aug. 03, 2013 Kmart USD ($) Store	Aug. 02, 2014 Lease Termination Costs USD ($)		Aug. 03, 2013 Lease Termination Costs USD ($)		Aug. 02, 2014 Lease Termination Costs USD ($)		Aug. 03, 2013 Lease Termination Costs USD ($)		Feb. 01, 2014 Lease Termination Costs USD ($)	Aug. 02, 2014 Lease Termination Costs Sears Canada [Member] USD ($)		Aug. 02, 2014 Lease Termination Costs Sears Canada [Member] USD ($)		Aug. 03, 2013 Lease Termination Costs Sears Canada [Member] USD ($)		Aug. 02, 2014 Lease Termination Costs Sears Domestic USD ($) Store		Aug. 03, 2013 Lease Termination Costs Sears Domestic USD ($)		Aug. 02, 2014 Lease Termination Costs Sears Domestic USD ($) Store		Aug. 03, 2013 Lease Termination Costs Sears Domestic USD ($)		Aug. 02, 2014 Lease Termination Costs Kmart USD ($) Store		Aug. 03, 2013 Lease Termination Costs Kmart USD ($)		Aug. 02, 2014 Lease Termination Costs Kmart USD ($) Store		Aug. 03, 2013 Lease Termination Costs Kmart USD ($) Store		May 03, 2014 Lease Amendment and Early Termination [Member] Sears Domestic USD ($)
Restructuring Cost and Reserve [Line Items]
Document Fiscal Year Focus			2014
Gains (Losses) on Sales of Other Real Estate						$ 10	$ 180	$ 13	$ 55
Proceeds from Sale of Real Estate				86		10		16					184	191
Proceeds From Lease Termination																																																								64
Income (Loss) from Equity Method Investments											23
Equity Method Investment, Net Sales Proceeds											30	33
Number of stores closed																	8	10	21	10	46	16	75	27																5				12				46				51		4
Restructuring and Related Cost, Expected Cost	16		16
Lease Obligation Charges																																								2				3				11						1
Store closing costs	45	11	69	33							5				15	2	10	3	15	14	30	8	39	17	15	[1]	(3)	[1]	18	[1]	(7)	[1]		0	[1]	5	[1]	0	[1]	4	[1]	(3)	[1]	2	[1]	(6)	[1]	11	[1]	0	[1]	11	[1]	(1)	[1]
Number of stores closing																	2	6	6	12	26	12	40	25
Store closing cost accruals	175	157	175	157	199																				125		119		125		119		119
Impairment of Long-Lived Assets Held-for-use											15				15
Gain (Loss) on Disposition of Property Plant Equipment, Excluding Oil and Gas Property and Timber Property	$ 34	$ 241	$ 80	$ 255							$ 0		$ 181		$ (1)	$ 181	$ 3	$ 45	$ 29	$ 46	$ 31	$ 15	$ 52	$ 28
Number of Properties Sold										2						2			2					1

[1] Recorded within Selling and administrative on the Condensed Consolidated Statements of Operations. Lease termination costs are net of estimated sublease income, and include the reversal of closed store reserves for which the lease agreement has been terminated and the reversal of deferred rent balances related to closed stores.

XML

SUMMARY OF SEGMENT DATA (Tables)

6 Months Ended

Aug. 02, 2014

Segment Reporting [Abstract]

Segment Data

	13 Weeks Ended August 2, 2014
millions	Kmart			Sears Domestic			Sears Canada			Sears Holdings
Merchandise sales and services
Hardlines	$	892		$	2,362		$	418		$	3,672
Apparel and Soft Home	935			770			325			2,030
Food and Drug	1,075			2			—			1,077
Service	4			612			26			642
Other	17			564			11			592
Total merchandise sales and services	2,923			4,310			780			8,013
Costs and expenses
Cost of sales, buying and occupancy	2,341			3,334			596			6,271
Selling and administrative	729			1,184			205			2,118
Depreciation and amortization	24			110			18			152
Impairment charges	2			3			15			20
Gain on sales of assets	(31		)	(3		)	—			(34		)
Total costs and expenses	3,065			4,628			834			8,527
Operating loss	$	(142	)	$	(318	)	$	(54	)	$	(514	)
Total assets	$	3,730		$	10,778		$	1,930		$	16,438
Capital expenditures	$	7		$	38		$	9		$	54

	13 Weeks Ended August 3, 2013
millions	Kmart			Sears Domestic			Sears Canada			Sears Holdings
Merchandise sales and services
Hardlines	$	977		$	2,458		$	484		$	3,919
Apparel and Soft Home	1,003			1,120			387			2,510
Food and Drug	1,169			3			—			1,172
Service	4			656			36			696
Other	15			546			13			574
Total merchandise sales and services	3,168			4,783			920			8,871
Costs and expenses
Cost of sales, buying and occupancy	2,459			3,544			682			6,685
Selling and administrative	747			1,301			243			2,291
Depreciation and amortization	33			129			25			187
Gain on sales of assets	(15		)	(45		)	(181		)	(241		)
Total costs and expenses	3,224			4,929			769			8,922
Operating income (loss)	$	(56	)	$	(146	)	$	151		$	(51	)
Total assets	$	4,291		$	12,602		$	2,385		$	19,278
Capital expenditures	$	4		$	47		$	5		$	56

	26 Weeks Ended August 2, 2014
millions	Kmart			Sears Domestic			Sears Canada			Sears Holdings
Merchandise sales and services
Hardlines	$	1,709		$	4,513		$	773		$	6,995
Apparel and Soft Home	1,886			1,792			625			4,303
Food and Drug	2,184			4			—			2,188
Service	8			1,196			57			1,261
Other	33			1,090			22			1,145
Total merchandise sales and services	5,820			8,595			1,477			15,892
Costs and expenses
Cost of sales, buying and occupancy	4,643			6,550			1,129			12,322
Selling and administrative	1,420			2,356			431			4,207
Depreciation and amortization	47			224			36			307
Impairment charges	2			8			15			25
(Gain) loss on sales of assets	(52		)	(29		)	1			(80		)
Total costs and expenses	6,060			9,109			1,612			16,781
Operating loss	$	(240	)	$	(514	)	$	(135	)	$	(889	)
Total assets	$	3,730		$	10,778		$	1,930		$	16,438
Capital expenditures	$	20		$	87		$	19		$	126

	26 Weeks Ended August 3, 2013
millions	Kmart			Sears Domestic			Sears Canada			Sears Holdings
Merchandise sales and services
Hardlines	$	1,875		$	4,641		$	925		$	7,441
Apparel and Soft Home	1,996			2,285			741			5,022
Food and Drug	2,359			6			—			2,365
Service	9			1,271			68			1,348
Other	32			1,087			28			1,147
Total merchandise sales and services	6,271			9,290			1,762			17,323
Costs and expenses
Cost of sales, buying and occupancy	4,857			6,837			1,287			12,981
Selling and administrative	1,460			2,556			493			4,509
Depreciation and amortization	66			262			50			378
Impairment charges	—			8			—			8
Gain on sales of assets	(28		)	(46		)	(181		)	(255		)
Total costs and expenses	6,355			9,617			1,649			17,621
Operating income (loss)	$	(84	)	$	(327	)	$	113		$	(298	)
Total assets	$	4,291		$	12,602		$	2,385		$	19,278
Capital expenditures	$	25		$	76		$	15		$	116

XML

SUPPLEMENTAL FINANCIAL INFORMATION (Tables)

6 Months Ended

Aug. 02, 2014

Supplemental Financial Information Disclosure [Abstract]

Other Long-Term Liabilities

Other long-term liabilities at August 2, 2014, August 3, 2013 and February 1, 2014 consisted of the following:

millions	August 2, 2014		August 3, 2013		February 1, 2014
Unearned revenues	$	836	$	858	$	836
Self-insurance reserves	691		705		686
Other	480		518		486
Total	$	2,007	$	2,081	$	2,008

XML

BASIS OF PRESENTATION

6 Months Ended

Aug. 02, 2014

Organization, Consolidation and Presentation of Financial Statements [Abstract]

BASIS OF PRESENTATION

BASIS OF PRESENTATION

Sears Holdings Corporation ("Holdings") is the parent company of Kmart Holding Corporation ("Kmart") and Sears, Roebuck and Co. ("Sears"). Holdings (together with its subsidiaries, "we," "us," "our," or the "Company") was formed as a Delaware corporation in 2004 in connection with the merger of Kmart and Sears (the "Merger"), on March 24, 2005. We are an integrated retailer with 1,870 full-line and specialty retail stores in the United States, operating through Kmart and Sears, and 432 full-line and specialty retail stores in Canada operating through Sears Canada Inc. ("Sears Canada"), a 51%-owned subsidiary. We have three reportable segments: Kmart, Sears Domestic and Sears Canada.

These interim unaudited Condensed Consolidated Financial Statements have been prepared in accordance with the rules and regulations of the Securities and Exchange Commission ("SEC"). Accordingly, they do not include all of the information and footnotes required in annual consolidated financial statements prepared in accordance with accounting principles generally accepted in the United States of America. In the opinion of management, all adjustments (which include normal recurring adjustments) considered necessary for a fair presentation have been included. Operating results for the interim period are not necessarily indicative of the results that may be expected for the full fiscal year. The retail business is seasonal in nature, and we generate a high proportion of our revenues and operating cash flows during the fourth quarter of our fiscal year, which includes the holiday season. These interim financial statements and related notes should be read in conjunction with the audited consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the fiscal year ended February 1, 2014.

Depreciation Expense

Depreciation expense included within depreciation and amortization expense reported on the Condensed Consolidated Statements of Operations was $147 million, $297 million, $181 million, and $361 million for the 13- and 26- week periods ended August 2, 2014 and August 3, 2013, respectively.

Separation of Lands' End, Inc.

On April 4, 2014, we completed the separation of our Lands' End business through a spin-off transaction. The separation was structured to be tax free to our U.S. shareholders for U.S. federal income tax purposes. Prior to the separation, Lands' End, Inc. ("Lands' End") entered into an asset-based senior secured revolving credit facility, which provides for maximum borrowings of approximately $175 million with a letter of credit sub-limit, and a senior secured term loan facility of approximately $515 million. The proceeds of the term loan facility were used to fund a $500 million dividend to Holdings and pay fees and expenses associated with the foregoing facilities. We accounted for this spin-off in accordance with accounting standards applicable to spin-off transactions. Accordingly, we classified the carrying value of net assets of $323 million contributed to Lands' End as a reduction of capital in excess of par value in the Condensed Consolidated Statement of Equity for the 26-week period ended August 2, 2014.

Additionally, as a result of Mr. Lampert's role as our Chairman and Chief Executive Officer, and Chairman and Chief Executive Officer of ESL Investments, Inc. (together with its affiliated funds, "ESL"), and the continuing arrangements between Holdings and Lands' End (as further described in Note 14), Holdings has determined that it has significant influence over Lands' End. Accordingly, the operating results for Lands' End through the date of the spin-off are presented within the consolidated continuing operations of Holdings and the Sears Domestic segment in the accompanying Condensed Consolidated Financial Statements.

In connection with the separation, Holdings and certain of its subsidiaries entered into various agreements with Lands' End under the terms described in Note 14.

Changes in the carrying amount of goodwill by segment, which reflects the impact related to the Lands’ End spin-off, were as follows:

millions	Sears Domestic
Balance, February 1, 2014:
Goodwill	$	379
2014 activity:
Separation of Lands' End, Inc.	(110		)
Balance, August 2, 2014	$	269

Changes in the carrying amount of trade names and other intangible assets by segment, which reflects the impact related to the Lands’ End spin-off, were as follows:

millions	Sears Domestic			Total
Balance, February 1, 2014:
Trade names and intangible assets	$	2,651		$	2,850
2014 activity:
Separation of Lands' End, Inc.	(531		)	(531		)
Amortization expense and other	(14		)	(17		)
Balance, August 2, 2014	$	2,106		$	2,302

XML

GUARANTOR/NON-GUARANTOR SUBSIDIARY FINANCIAL INFORMATION (Tables)

6 Months Ended

Aug. 02, 2014

Aug. 03, 2013

Condensed Financial Information of Parent Company Only Disclosure [Abstract]

Condensed Consolidating Balance Sheet

Condensed Consolidating Balance Sheet

August 2, 2014

millions	Parent		Guarantor Subsidiaries		Non- Guarantor Subsidiaries		Eliminations			Consolidated
Current assets
Cash and cash equivalents	$	—	$	565	$	264	$	—		$	829
Intercompany receivables	—		—		26,369		(26,369		)	—
Accounts receivable	—		397		119		—			516
Merchandise inventories	—		5,783		600		—			6,383
Prepaid expenses and other current assets	43		971		451		(1,036		)	429
Total current assets	43		7,716		27,803		(27,405		)	8,157
Total property and equipment, net	—		3,680		1,411		—			5,091
Goodwill and intangible assets	—		288		2,283		—			2,571
Other assets	12		427		2,742		(2,562		)	619
Investment in subsidiaries	13,638		25,474		—		(39,112		)	—
TOTAL ASSETS	$	13,693	$	37,585	$	34,239	$	(69,079	)	$	16,438
Current liabilities
Short-term borrowings	$	—	$	1,404	$	—	$	—		$	1,404
Current portion of long-term debt and capitalized lease obligations	—		72		13		—			85
Merchandise payables	—		2,239		267		—			2,506
Intercompany payables	12,112		14,257		—		(26,369		)	—
Short-term deferred tax liabilities	2		504		—		(22		)	484
Other current liabilities	25		2,362		2,325		(1,013		)	3,699
Total current liabilities	12,139		20,838		2,605		(27,404		)	8,178
Long-term debt and capitalized lease obligations	1,238		3,805		70		(2,298		)	2,815
Pension and postretirement benefits	—		1,480		241		—			1,721
Long-term deferred tax liabilities	—		—		1,006		(208		)	798
Other long-term liabilities	—		794		1,466		(253		)	2,007
Total Liabilities	13,377		26,917		5,388		(30,163		)	15,519
EQUITY
Shareholder’s equity	316		10,668		28,851		(39,323		)	512
Noncontrolling interest	—		—		—		407			407
Total Equity	316		10,668		28,851		(38,916		)	919
TOTAL LIABILITIES AND EQUITY	$	13,693	$	37,585	$	34,239	$	(69,079	)	$	16,438

Condensed Consolidating Balance Sheet

August 3, 2013

millions	Parent		Guarantor Subsidiaries		Non- Guarantor Subsidiaries		Eliminations			Consolidated
Current assets
Cash and cash equivalents	$	—	$	336	$	335	$	—		$	671
Intercompany receivables	—		—		26,087		(26,087		)	—
Accounts receivable	—		530		111		—			641
Merchandise inventories	—		6,856		852		—			7,708
Prepaid expenses and other current assets	92		1,093		470		(1,175		)	480
Total current assets	92		8,815		27,855		(27,262		)	9,500
Total property and equipment, net	—		4,241		1,545		—			5,786
Goodwill and intangible assets	—		955		2,288		—			3,243
Other assets	15		227		2,905		(2,398		)	749
Investment in subsidiaries	15,822		25,301		—		(41,123		)	—
TOTAL ASSETS	$	15,929	$	39,539	$	34,593	$	(70,783	)	$	19,278
Current liabilities
Short-term borrowings	$	—	$	1,756	$	—	$	—		$	1,756
Current portion of long-term debt and capitalized lease obligations	—		60		15		—			75
Merchandise payables	—		2,530		373		—			2,903
Intercompany payables	12,442		13,645		—		(26,087		)	—
Short-term deferred tax liabilities	3		412		—		(33		)	382
Other current liabilities	26		2,405		2,555		(1,142		)	3,844
Total current liabilities	12,471		20,808		2,943		(27,262		)	8,960
Long-term debt and capitalized lease obligations	1,237		2,923		101		(2,350		)	1,911
Pension and postretirement benefits	—		2,150		389		—			2,539
Long-term deferred tax liabilities	—		8		889		66			963
Other long-term liabilities	—		826		1,508		(253		)	2,081
Total Liabilities	13,708		26,715		5,830		(29,799		)	16,454
EQUITY
Shareholder’s equity	2,221		12,824		28,763		(41,448		)	2,360
Noncontrolling interest	—		—		—		464			464
Total Equity	2,221		12,824		28,763		(40,984		)	2,824
TOTAL LIABILITIES AND EQUITY	$	15,929	$	39,539	$	34,593	$	(70,783	)	$	19,278

Condensed Consolidating Balance Sheet

February 1, 2014

millions	Parent		Guarantor Subsidiaries		Non- Guarantor Subsidiaries		Eliminations			Consolidated
Current assets
Cash and cash equivalents	$	—	$	537	$	491	$	—		$	1,028
Intercompany receivables	—		—		25,884		(25,884		)	—
Accounts receivable	—		425		128		—			553
Merchandise inventories	—		6,356		678		—			7,034
Prepaid expenses and other current assets	44		873		375		(948		)	344
Total current assets	44		8,191		27,556		(26,832		)	8,959
Total property and equipment, net	—		3,906		1,488		—			5,394
Goodwill and intangible assets	—		944		2,285		—			3,229
Other assets	13		240		2,603		(2,177		)	679
Investment in subsidiaries	14,743		25,303		—		(40,046		)	—
TOTAL ASSETS	$	14,800	$	38,584	$	33,932	$	(69,055	)	$	18,261
Current liabilities
Short-term borrowings	$	—	$	1,332	$	—	$	—		$	1,332
Current portion of long-term debt and capitalized lease obligations	—		70		13		—			83
Merchandise payables	—		2,213		283		—			2,496
Intercompany payables	12,103		13,781		—		(25,884		)	—
Short-term deferred tax liabilities	2		408		—		(23		)	387
Other current liabilities	26		2,412		2,374		(925		)	3,887
Total current liabilities	12,131		20,216		2,670		(26,832		)	8,185
Long-term debt and capitalized lease obligations	1,238		3,781		76		(2,261		)	2,834
Pension and postretirement benefits	—		1,681		261		—			1,942
Long-term deferred tax liabilities	—		128		955		26			1,109
Other long-term liabilities	—		805		1,453		(250		)	2,008
Total Liabilities	13,369		26,611		5,415		(29,317		)	16,078
EQUITY
Shareholder’s equity	1,431		11,973		28,517		(40,182		)	1,739
Noncontrolling interest	—		—		—		444			444
Total Equity	1,431		11,973		28,517		(39,738		)	2,183
TOTAL LIABILITIES AND EQUITY	$	14,800	$	38,584	$	33,932	$	(69,055	)	$	18,261

Condensed Consolidating Statement of Operations

Condensed Consolidating Statement of Operations

For the 13 Weeks Ended August 2, 2014

millions	Parent			Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Eliminations			Consolidated
Merchandise sales and services	$	—		$	7,315		$	1,530		$	(832	)	$	8,013
Cost of sales, buying and occupancy	—			5,793			903			(425		)	6,271
Selling and administrative	1			2,079			445			(407		)	2,118
Depreciation and amortization	—			115			37			—			152
Impairment charges	—			5			15			—			20
Gain on sales of assets	—			(34		)	—			—			(34		)
Total costs and expenses	1			7,958			1,400			(832		)	8,527
Operating income (loss)	(1		)	(643		)	130			—			(514		)
Interest expense	(53		)	(111		)	(52		)	144			(72		)
Interest and investment income	—			9			167			(144		)	32
Other income	—			—			5			—			5
Income (loss) before income taxes	(54		)	(745		)	250			—			(549		)
Income tax (expense) benefit	—			1			(33		)	—			(32		)
Equity (deficit) in earnings in subsidiaries	(527		)	125			—			402			—
Net income (loss)	(581		)	(619		)	217			402			(581		)
Loss attributable to noncontrolling interests	—			—			—			8			8
NET INCOME (LOSS) ATTRIBUTABLE TO HOLDINGS’ SHAREHOLDERS	$	(581	)	$	(619	)	$	217		$	410		$	(573	)

Condensed Consolidating Statement of Operations

For the 13 Weeks Ended August 3, 2013

millions	Parent			Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Eliminations			Consolidated
Merchandise sales and services	$	—		$	8,030		$	1,780		$	(939	)	$	8,871
Cost of sales, buying and occupancy	—			6,121			1,037			(473		)	6,685
Selling and administrative	1			2,219			537			(466		)	2,291
Depreciation and amortization	—			142			45			—			187
Gain on sales of assets	—			(60		)	(181		)	—			(241		)
Total costs and expenses	1			8,422			1,438			(939		)	8,922
Operating income (loss)	(1		)	(392		)	342			—			(51		)
Interest expense	(55		)	(90		)	(22		)	108			(59		)
Interest and investment income	—			10			112			(108		)	14
Other loss	—			—			(1		)	—			(1		)
Income (loss) before income taxes	(56		)	(472		)	431			—			(97		)
Income tax (expense) benefit	—			37			(67		)	—			(30		)
Equity (deficit) in earnings in subsidiaries	(71		)	281			—			(210		)	—
Net income (loss)	(127		)	(154		)	364			(210		)	(127		)
Income attributable to noncontrolling interests	—			—			—			(67		)	(67		)
NET INCOME (LOSS) ATTRIBUTABLE TO HOLDINGS’ SHAREHOLDERS	$	(127	)	$	(154	)	$	364		$	(277	)	$	(194	)

Condensed Consolidating Statement of Comprehensive Income

Condensed Consolidating Statement of Comprehensive Income (Loss)

For the 13 Weeks Ended August 2, 2014

millions	Parent			Guarantor Subsidiaries			Non- Guarantor Subsidiaries		Eliminations			Consolidated
Net income (loss)	$	(581	)	$	(619	)	$	217	$	402		$	(581	)
Other comprehensive income (loss)
Pension and postretirement adjustments, net of tax	—			29			6		—			35
Deferred loss on derivatives, net of tax	(1		)	—			—		—			(1		)
Currency translation adjustments, net of tax	(1		)	—			4		—			3
Unrealized net gain, net of tax	—			—			161		(161		)	—
Total other comprehensive income (loss)	(2		)	29			171		(161		)	37
Comprehensive income (loss)	(583		)	(590		)	388		241			(544		)
Comprehensive loss attributable to noncontrolling interests	—			—			—		3			3
Comprehensive income (loss) attributable to Holdings’ shareholders	$	(583	)	$	(590	)	$	388	$	244		$	(541	)

Condensed Consolidating Statement of Comprehensive Income (Loss)

For the 13 Weeks Ended August 3, 2013

millions	Parent			Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Eliminations			Consolidated
Net income (loss)	$	(127	)	$	(154	)	$	364		$	(210	)	$	(127	)
Other comprehensive income (loss)
Pension and postretirement adjustments, net of tax	—			42			6			—			48
Currency translation adjustments, net of tax	—			—			(20		)	—			(20		)
Unrealized net loss, net of tax	—			(3		)	(100		)	103			—
Total other comprehensive income (loss)	—			39			(114		)	103			28
Comprehensive income (loss)	(127		)	(115		)	250			(107		)	(99		)
Comprehensive income attributable to noncontrolling interests	—			—			—			(61		)	(61		)
Comprehensive income (loss) attributable to Holdings’ shareholders	$	(127	)	$	(115	)	$	250		$	(168	)	$	(160	)

Condensed Consolidating Statement of Comprehensive Income (Loss)

For the 26 Weeks Ended August 2, 2014

millions	Parent			Guarantor Subsidiaries			Non- Guarantor Subsidiaries		Eliminations			Consolidated
Net income (loss)	$	(1,023	)	$	(1,117	)	$	373	$	744		$	(1,023	)
Other comprehensive income (loss)
Pension and postretirement adjustments, net of tax	—			57			8		—			65
Deferred loss on derivatives, net of tax	(2		)	—			—		—			(2		)
Currency translation adjustments, net of tax	—			—			14		—			14
Unrealized net gain, net of tax	—			—			112		(112		)	—
Total other comprehensive income (loss)	(2		)	57			134		(112		)	77
Comprehensive income (loss)	(1,025		)	(1,060		)	507		632			(946		)
Comprehensive loss attributable to noncontrolling interests	—			—			—		37			37
Comprehensive income (loss) attributable to Holdings’ shareholders	$	(1,025	)	$	(1,060	)	$	507	$	669		$	(909	)

Condensed Consolidating Statement of Comprehensive Income (Loss)

For the 26 Weeks Ended August 3, 2013

millions	Parent			Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Eliminations			Consolidated
Net income (loss)	$	(419	)	$	(477	)	$	577		$	(100	)	$	(419	)
Other comprehensive income (loss)
Pension and postretirement adjustments, net of tax	—			84			10			—			94
Currency translation adjustments, net of tax	—			—			(27		)	—			(27		)
Unrealized net loss, net of tax	—			(2		)	(44		)	46			—
Total other comprehensive income (loss)	—			82			(61		)	46			67
Comprehensive income (loss)	(419		)	(395		)	516			(54		)	(352		)
Comprehensive income attributable to noncontrolling interests	—			—			—			(47		)	(47		)
Comprehensive income (loss) attributable to Holdings’ shareholders	$	(419	)	$	(395	)	$	516		$	(101	)	$	(399	)

Condensed Consolidating Statement of Cash Flows

Condensed Consolidating Statement of Cash Flows

For the 26 Weeks Ended August 2, 2014

millions	Parent			Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Eliminations			Consolidated
Net cash provided by (used in) operating activities	$	92		$	(1,029	)	$	290		$	(100	)	$	(747	)
Proceeds from sales of property and investments	—			133			31			—			164
Purchases of property and equipment	—			(107		)	(19		)	—			(126		)
Net investing with Affiliates	(92		)	—			(429		)	521			—
Net cash provided by (used in) investing activities	(92		)	26			(417		)	521			38
Repayments of long-term debt	—			(35		)	(7		)	—			(42		)
Increase in short-term borrowings, primarily 90 days or less	—			72			—			—			72
Lands' End, Inc. pre-separation funding	—			515			—			—			515
Separation of Lands' End, Inc.	—			(31		)	—			—			(31		)
Debt issuance costs	—			(11		)	—			—			(11		)
Intercompany dividend	—			—			(100		)	100			—
Net borrowing with Affiliates	—			521			—			(521		)	—
Net cash provided by (used in) financing activities	—			1,031			(107		)	(421		)	503
Effect of exchange rate changes on cash and cash equivalents	—			—			7			—			7
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS	—			28			(227		)	—			(199		)
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR	—			537			491			—			1,028
CASH AND CASH EQUIVALENTS, END OF PERIOD	$	—		$	565		$	264		$	—		$	829

Condensed Consolidating Statement of Cash Flows

For the 26 Weeks Ended August 3, 2013

millions	Parent			Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Eliminations			Consolidated
Net cash provided by (used in) operating activities	$	—		$	(1,213	)	$	498		$	—		$	(715	)
Proceeds from sales of property and investments	—			100			187			—			287
Net increase in investments and restricted cash	—			—			(1		)	—			(1		)
Purchases of property and equipment	—			(101		)	(15		)	—			(116		)
Net investing with Affiliates	—			—			45			(45		)	—
Net cash provided by (used in) investing activities	—			(1		)	216			(45		)	170
Proceeds from debt issuances	—			—			2			—			2
Repayments of long-term debt	—			(39		)	(7		)	—			(46		)
Increase in short-term borrowings, primarily 90 days or less	—			662			—			—			662
Intercompany dividend	257			21			(278		)	—			—
Net borrowing with Affiliates	(257		)	586			(374		)	45			—
Net cash provided by (used in) financing activities	—			1,230			(657		)	45			618
Effect of exchange rate changes on cash and cash equivalents	—			—			(11		)	—			(11		)
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS	—			16			46			—			62
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR	—			320			289			—			609
CASH AND CASH EQUIVALENTS, END OF PERIOD	$	—		$	336		$	335		$	—		$	671

XML

BORROWINGS Debt Repurchase Authorization (Details) (USD $) In Millions, unless otherwise specified	12 Months Ended			6 Months Ended
	Jan. 28, 2012	Aug. 02, 2014	Jan. 28, 2006	Aug. 02, 2014 Sears Roebuck Acceptance Corp [Member]
Debt Instrument [Line Items]
Debt Repurchase Authorized Amount			$ 500
Extinguishment of Debt, Amount	10			215
Debt Repurchase Remaining Capacity		$ 275

XML

Summary of Segment Data (Detail) (USD $) In Millions, unless otherwise specified	3 Months Ended				6 Months Ended					3 Months Ended		6 Months Ended		3 Months Ended		6 Months Ended		3 Months Ended		6 Months Ended		3 Months Ended		6 Months Ended		3 Months Ended		6 Months Ended		3 Months Ended		6 Months Ended		3 Months Ended		6 Months Ended		3 Months Ended		6 Months Ended		3 Months Ended		6 Months Ended		3 Months Ended		6 Months Ended		3 Months Ended		6 Months Ended		3 Months Ended		6 Months Ended		3 Months Ended		6 Months Ended		3 Months Ended		6 Months Ended		3 Months Ended		6 Months Ended		3 Months Ended		6 Months Ended		3 Months Ended		6 Months Ended		3 Months Ended		6 Months Ended		3 Months Ended		6 Months Ended		3 Months Ended		6 Months Ended		3 Months Ended		6 Months Ended		3 Months Ended		6 Months Ended		3 Months Ended		6 Months Ended
	Aug. 02, 2014		Aug. 03, 2013		Aug. 02, 2014		Aug. 03, 2013		Feb. 01, 2014	Aug. 02, 2014 Hardlines	Aug. 03, 2013 Hardlines	Aug. 02, 2014 Hardlines	Aug. 03, 2013 Hardlines	Aug. 02, 2014 Apparel and Soft Home	Aug. 03, 2013 Apparel and Soft Home	Aug. 02, 2014 Apparel and Soft Home	Aug. 03, 2013 Apparel and Soft Home	Aug. 02, 2014 Food and Drug	Aug. 03, 2013 Food and Drug	Aug. 02, 2014 Food and Drug	Aug. 03, 2013 Food and Drug	Aug. 02, 2014 Services [Domain]	Aug. 03, 2013 Services [Domain]	Aug. 02, 2014 Services [Domain]	Aug. 03, 2013 Services [Domain]	Aug. 02, 2014 Other [Domain]	Aug. 03, 2013 Other [Domain]	Aug. 02, 2014 Other [Domain]	Aug. 03, 2013 Other [Domain]	Aug. 02, 2014 Kmart	Aug. 03, 2013 Kmart	Aug. 02, 2014 Kmart	Aug. 03, 2013 Kmart	Aug. 02, 2014 Kmart Hardlines	Aug. 03, 2013 Kmart Hardlines	Aug. 02, 2014 Kmart Hardlines	Aug. 03, 2013 Kmart Hardlines	Aug. 02, 2014 Kmart Apparel and Soft Home	Aug. 03, 2013 Kmart Apparel and Soft Home	Aug. 02, 2014 Kmart Apparel and Soft Home	Aug. 03, 2013 Kmart Apparel and Soft Home	Aug. 02, 2014 Kmart Food and Drug	Aug. 03, 2013 Kmart Food and Drug	Aug. 02, 2014 Kmart Food and Drug	Aug. 03, 2013 Kmart Food and Drug	Aug. 02, 2014 Kmart Services [Domain]	Aug. 03, 2013 Kmart Services [Domain]	Aug. 02, 2014 Kmart Services [Domain]	Aug. 03, 2013 Kmart Services [Domain]	Aug. 02, 2014 Kmart Other [Domain]	Apr. 28, 2012 Kmart Other [Domain]	Aug. 02, 2014 Kmart Other [Domain]	Aug. 03, 2013 Kmart Other [Domain]	Aug. 02, 2014 Sears Domestic	Aug. 03, 2013 Sears Domestic	Aug. 02, 2014 Sears Domestic	Aug. 03, 2013 Sears Domestic	Aug. 02, 2014 Sears Domestic Hardlines	Aug. 03, 2013 Sears Domestic Hardlines	Aug. 02, 2014 Sears Domestic Hardlines	Aug. 03, 2013 Sears Domestic Hardlines	Aug. 02, 2014 Sears Domestic Apparel and Soft Home	Aug. 03, 2013 Sears Domestic Apparel and Soft Home	Aug. 02, 2014 Sears Domestic Apparel and Soft Home	Aug. 03, 2013 Sears Domestic Apparel and Soft Home	Aug. 02, 2014 Sears Domestic Food and Drug	Aug. 03, 2013 Sears Domestic Food and Drug	Aug. 02, 2014 Sears Domestic Food and Drug	Aug. 03, 2013 Sears Domestic Food and Drug	Aug. 02, 2014 Sears Domestic Services [Domain]	Aug. 03, 2013 Sears Domestic Services [Domain]	Aug. 02, 2014 Sears Domestic Services [Domain]	Aug. 03, 2013 Sears Domestic Services [Domain]	Aug. 02, 2014 Sears Domestic Other [Domain]	Apr. 28, 2012 Sears Domestic Other [Domain]	Aug. 02, 2014 Sears Domestic Other [Domain]	Aug. 03, 2013 Sears Domestic Other [Domain]	Aug. 02, 2014 Sears Canada [Member]	Aug. 03, 2013 Sears Canada [Member]	Aug. 02, 2014 Sears Canada [Member]	Aug. 03, 2013 Sears Canada [Member]	Aug. 02, 2014 Sears Canada [Member] Hardlines	Aug. 03, 2013 Sears Canada [Member] Hardlines	Aug. 02, 2014 Sears Canada [Member] Hardlines	Aug. 03, 2013 Sears Canada [Member] Hardlines	Aug. 02, 2014 Sears Canada [Member] Apparel and Soft Home	Aug. 03, 2013 Sears Canada [Member] Apparel and Soft Home	Aug. 02, 2014 Sears Canada [Member] Apparel and Soft Home	Aug. 03, 2013 Sears Canada [Member] Apparel and Soft Home	Aug. 02, 2014 Sears Canada [Member] Food and Drug	Aug. 03, 2013 Sears Canada [Member] Food and Drug	Aug. 02, 2014 Sears Canada [Member] Food and Drug	Aug. 03, 2013 Sears Canada [Member] Food and Drug	Aug. 02, 2014 Sears Canada [Member] Services [Domain]	Aug. 03, 2013 Sears Canada [Member] Services [Domain]	Aug. 02, 2014 Sears Canada [Member] Services [Domain]	Aug. 03, 2013 Sears Canada [Member] Services [Domain]	Aug. 02, 2014 Sears Canada [Member] Other [Domain]	Apr. 28, 2012 Sears Canada [Member] Other [Domain]	Aug. 02, 2014 Sears Canada [Member] Other [Domain]	Aug. 03, 2013 Sears Canada [Member] Other [Domain]
Segment Reporting Information [Line Items]
Merchandise sales and services	$ 8,013	[1]	$ 8,871	[1]	$ 15,892	[1]	$ 17,323	[1]		$ 3,672	$ 3,919	$ 6,995	$ 7,441	$ 2,030	$ 2,510	$ 4,303	$ 5,022	$ 1,077	$ 1,172	$ 2,188	$ 2,365	$ 642	$ 696	$ 1,261	$ 1,348	$ 592	$ 574	$ 1,145	$ 1,147	$ 2,923	$ 3,168	$ 5,820	$ 6,271	$ 892	$ 977	$ 1,709	$ 1,875	$ 935	$ 1,003	$ 1,886	$ 1,996	$ 1,075	$ 1,169	$ 2,184	$ 2,359	$ 4	$ 4	$ 8	$ 9	$ 17	$ 15	$ 33	$ 32	$ 4,310	$ 4,783	$ 8,595	$ 9,290	$ 2,362	$ 2,458	$ 4,513	$ 4,641	$ 770	$ 1,120	$ 1,792	$ 2,285	$ 2	$ 3	$ 4	$ 6	$ 612	$ 656	$ 1,196	$ 1,271	$ 564	$ 546	$ 1,090	$ 1,087	$ 780	$ 920	$ 1,477	$ 1,762	$ 418	$ 484	$ 773	$ 925	$ 325	$ 387	$ 625	$ 741	$ 0	$ 0	$ 0	$ 0	$ 26	$ 36	$ 57	$ 68	$ 11	$ 13	$ 22	$ 28
COSTS AND EXPENSES
Cost of sales, buying and occupancy	6,271	[1]	6,685	[1]	12,322	[1]	12,981	[1]																						2,341	2,459	4,643	4,857																					3,334	3,544	6,550	6,837																					596	682	1,129	1,287
Selling and administrative	2,118		2,291		4,207		4,509																							729	747	1,420	1,460																					1,184	1,301	2,356	2,556																					205	243	431	493
Depreciation and amortization	152		187		307		378																							24	33	47	66																					110	129	224	262																					18	25	36	50
Asset Impairment Charges	20		0		25		8																							2		2	0																					3		8	8																					15		15	0
Gain (Loss) on Disposition of Property Plant Equipment, Excluding Oil and Gas Property and Timber Property	(34)		(241)		(80)		(255)																							(31)	(15)	(52)	(28)																					(3)	(45)	(29)	(46)																					0	(181)	1	(181)
Total costs and expenses	8,527		8,922		16,781		17,621																							3,065	3,224	6,060	6,355																					4,628	4,929	9,109	9,617																					834	769	1,612	1,649
Operating Income (Loss)	(514)		(51)		(889)		(298)																							(142)	(56)	(240)	(84)																					(318)	(146)	(514)	(327)																					(54)	151	(135)	113
Total assets	16,438		19,278		16,438		19,278		18,261																					3,730	4,291	3,730	4,291																					10,778	12,602	10,778	12,602																					1,930	2,385	1,930	2,385
Payments to Acquire Property, Plant, and Equipment	$ 54		$ 56		$ 126		$ 116																							$ 7	$ 4	$ 20	$ 25																					$ 38	$ 47	$ 87	$ 76																					$ 9	$ 5	$ 19	$ 15

[1] Includes merchandise sales to Sears Hometown and Outlet Stores, Inc. ("SHO") of $383 million and $386 million for the 13 weeks ended August 2, 2014 and August 3, 2013, respectively and $741 million and $755 million for the 26 weeks ended August 2, 2014 and August 3, 2013, respectively. Pursuant to the terms of the separation, merchandise is sold to SHO at cost.

XML

Condensed Consolidated Statements of Operations (USD $) In Millions, except Per Share data, unless otherwise specified	3 Months Ended				6 Months Ended
	Aug. 02, 2014		Aug. 03, 2013		Aug. 02, 2014		Aug. 03, 2013
REVENUES
Merchandise sales and services	$ 8,013	[1]	$ 8,871	[1]	$ 15,892	[1]	$ 17,323	[1]
COSTS AND EXPENSES
Cost of sales, buying and occupancy	6,271	[1]	6,685	[1]	12,322	[1]	12,981	[1]
Selling and administrative	2,118		2,291		4,207		4,509
Depreciation and amortization	152		187		307		378
Impairment charges	20		0		25		8
Gain on sales of assets	(34)		(241)		(80)		(255)
Total costs and expenses	8,527		8,922		16,781		17,621
Operating income (loss)	(514)		(51)		(889)		(298)
Interest expense	(72)		(59)		(143)		(120)
Interest and investment income	32		14		36		21
Other Nonoperating Income (Expense)	5		(1)		2		(1)
Income (loss) before income taxes	(549)		(97)		(994)		(398)
Income tax (expense) benefit	(32)		(30)		(29)		(21)
Net income (loss)	(581)		(127)		(1,023)		(419)
(Income) loss attributable to noncontrolling interests	8		(67)		48		(54)
NET INCOME (LOSS) ATTRIBUTABLE TO HOLDINGS’ SHAREHOLDERS	(573)		(194)		(975)		(473)
NET INCOME (LOSS) PER COMMON SHARE ATTRIBUTABLE TO HOLDINGS’ SHAREHOLDERS
Basic earnings (loss) per share (in USD per share)	$ (5.39)		$ (1.83)		$ (9.17)		$ (4.46)
Diluted earnings (loss) per share (in USD per share)	$ (5.39)		$ (1.83)		$ (9.17)		$ (4.46)
Basic weighted average common shares outstanding (in shares)	106.3		106.1		106.3		106.1
Diluted weighted average common shares outstanding (in shares)	106.3		106.1		106.3		106.1
Sears Hometown and Outlet Stores, Inc. [Member]
Proceeds From Sale Of Inventory to Affiliate	$ 383		$ 386		$ 741		$ 755

[1] Includes merchandise sales to Sears Hometown and Outlet Stores, Inc. ("SHO") of $383 million and $386 million for the 13 weeks ended August 2, 2014 and August 3, 2013, respectively and $741 million and $755 million for the 26 weeks ended August 2, 2014 and August 3, 2013, respectively. Pursuant to the terms of the separation, merchandise is sold to SHO at cost.

XML

Store Closing Costs Recorded (Detail) (USD $) In Millions, unless otherwise specified	3 Months Ended				6 Months Ended				9 Months Ended
	Aug. 02, 2014		Aug. 03, 2013		Aug. 02, 2014		Aug. 03, 2013		Feb. 01, 2014
Restructuring Cost and Reserve [Line Items]
Gain (Loss) on Disposition of Property Plant Equipment, Excluding Oil and Gas Property and Timber Property	$ 34		$ 241		$ 80		$ 255
Document Fiscal Year Focus					2014
Depreciation expense	147		181		297		361
Store closing costs	45		11		69		33
Payments for Restructuring	65								34
Kmart
Restructuring Cost and Reserve [Line Items]
Gain (Loss) on Disposition of Property Plant Equipment, Excluding Oil and Gas Property and Timber Property	31		15		52		28
Store closing costs	30		8		39		17
Sears Domestic
Restructuring Cost and Reserve [Line Items]
Gain (Loss) on Disposition of Property Plant Equipment, Excluding Oil and Gas Property and Timber Property	3		45		29		46
Store closing costs	10		3		15		14
Sears Canada [Member]
Restructuring Cost and Reserve [Line Items]
Gain (Loss) on Disposition of Property Plant Equipment, Excluding Oil and Gas Property and Timber Property	0		181		(1)		181
Store closing costs	5				15		2
Markdowns
Restructuring Cost and Reserve [Line Items]
Store closing costs	11	[1]	7	[1]	18	[1]	15	[1]
Markdowns | Kmart
Restructuring Cost and Reserve [Line Items]
Store closing costs	10	[1]	4	[1]	15	[1]	9	[1]
Markdowns | Sears Domestic
Restructuring Cost and Reserve [Line Items]
Store closing costs	0	[1]	3	[1]	2	[1]	6	[1]
Markdowns | Sears Canada [Member]
Restructuring Cost and Reserve [Line Items]
Store closing costs	1	[1]			1	[1]	0	[1]
Severance Costs
Restructuring Cost and Reserve [Line Items]
Store closing costs	9		2	[2]	15	[2]	6	[2]
Payments for Restructuring	39								13
Severance Costs | Kmart
Restructuring Cost and Reserve [Line Items]
Store closing costs	3	[2]	1	[2]	4	[2]	2	[2]
Severance Costs | Sears Domestic
Restructuring Cost and Reserve [Line Items]
Store closing costs	2	[2]	1	[2]	2	[2]	2	[2]
Severance Costs | Sears Canada [Member]
Restructuring Cost and Reserve [Line Items]
Store closing costs	4	[2]			9	[2]	2	[2]
Lease Termination Costs
Restructuring Cost and Reserve [Line Items]
Store closing costs	15	[2]	(3)	[2]	18	[2]	(7)	[2]
Payments for Restructuring	13								12
Lease Termination Costs | Kmart
Restructuring Cost and Reserve [Line Items]
Store closing costs	11	[2]	0	[2]	11	[2]	(1)	[2]
Lease Termination Costs | Sears Domestic
Restructuring Cost and Reserve [Line Items]
Store closing costs	4	[2]	(3)	[2]	2	[2]	(6)	[2]
Lease Termination Costs | Sears Canada [Member]
Restructuring Cost and Reserve [Line Items]
Store closing costs	0	[2]			5	[2]	0	[2]
Other Charges
Restructuring Cost and Reserve [Line Items]
Store closing costs	4		4	[2]	7	[2]	9	[2]
Payments for Restructuring	13								9
Other Charges | Kmart
Restructuring Cost and Reserve [Line Items]
Store closing costs	3	[2]	3	[2]	6	[2]	6	[2]
Other Charges | Sears Domestic
Restructuring Cost and Reserve [Line Items]
Store closing costs	1	[2]	1	[2]	1	[2]	3	[2]
Other Charges | Sears Canada [Member]
Restructuring Cost and Reserve [Line Items]
Store closing costs	0	[2]			0	[2]	0	[2]
Impairment and Accelerated Depreciation
Restructuring Cost and Reserve [Line Items]
Impairment of Long-Lived Assets to be Disposed of	5				10		8
Depreciation expense	1				1		2
Store closing costs	6	[3]	1	[3]	11	[3]	10	[3]
Impairment and Accelerated Depreciation | Kmart
Restructuring Cost and Reserve [Line Items]
Store closing costs	3	[3]	0	[3]	3	[3]	1	[3]
Impairment and Accelerated Depreciation | Sears Domestic
Restructuring Cost and Reserve [Line Items]
Store closing costs	3	[3]	1	[3]	8	[3]	9	[3]
Impairment and Accelerated Depreciation | Sears Canada [Member]
Restructuring Cost and Reserve [Line Items]
Store closing costs	$ 0	[3]			$ 0	[3]	$ 0	[3]

[1] Recorded within Cost of sales, buying and occupancy on the Condensed Consolidated Statements of Operations.

[2] Recorded within Selling and administrative on the Condensed Consolidated Statements of Operations. Lease termination costs are net of estimated sublease income, and include the reversal of closed store reserves for which the lease agreement has been terminated and the reversal of deferred rent balances related to closed stores.

[3] Costs for the 13-week period ended August 2, 2014 include $5 million recorded within Impairment charges and $1 million recorded within Depreciation and amortization on the Condensed Consolidated Statement of Operations. Costs for the 13-week period ended August 3, 2013 are recorded within Depreciation and amortization on the Condensed Consolidated Statements of Operations. Costs for the 26-week periods ended August 2, 2014 and August 3, 2013 include $10 million and $8 million recorded within Impairment charges, respectively, and $1 million and $2 million recorded within Depreciation and amortization, respectively, on the Condensed Consolidated Statements of Operations.

XML

Condensed Consolidated Statements of Cash Flows (USD $) In Millions, unless otherwise specified	6 Months Ended
	Aug. 02, 2014	Aug. 03, 2013
Net income (loss)	$ (1,023)	$ (419)
Depreciation and amortization	307	378
Asset Impairment Charges	25	8
Gain (Loss) on Disposition of Property Plant Equipment, Excluding Oil and Gas Property and Timber Property	80	255
Gain (Loss) on Sale of Investments	23	0
Pension and Other Postretirement Benefit Contributions	205	176
Gain Loss Derived From Net Investment Hedges Recognized In Other Comprehensive Income	(1)	0
CASH FLOWS FROM OPERATING ACTIVITIES
Deferred income taxes	(36)	12
Merchandise inventories	308	(183)
Merchandise payables	46	157
Income and other taxes	(59)	(12)
Market To Market Activities Net	3	(1)
Other operating assets	(26)	(43)
Other operating liabilities	15	(181)
Net Cash Provided by (Used in) Operating Activities	(747)	(715)
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sales of property and investments	164	287
Net (increase) decrease in investments and restricted cash	0	(1)
Purchases of property and equipment	(126)	(116)
Net Cash Provided by (Used in) Investing Activities	38	170
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from debt issuances	0	2
Repayments of long-term debt	(42)	(46)
Increase (decrease) in short-term borrowings, primarily 90 days or less	72	662
Proceeds from Dividend from Affiliate	515	0
Cash Dividend in Connection with Spin-Off	31	0
Payments of Debt Issuance Costs	(11)	0
Net Cash Provided by (Used in) Financing Activities	503	618
Effect of exchange rate changes on cash and cash equivalents	7	(11)
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR	1,028	609
CASH AND CASH EQUIVALENTS, END OF PERIOD	829	671
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS	(199)	62
Supplemental Cash Flow Data:
Income taxes paid, net of refunds	89	32
Cash interest paid	117	98
Unpaid liability to acquire equipment and software	$ 28	$ 43

XML

Condensed Consolidating Statement of Comprehensive Income (Detail) (USD $) In Millions, unless otherwise specified	3 Months Ended		6 Months Ended
	Aug. 02, 2014	Aug. 03, 2013	Aug. 02, 2014	Aug. 03, 2013
Condensed Financial Statements, Captions [Line Items]
Net income (loss)	$ (581)	$ (127)	$ (1,023)	$ (419)
Other comprehensive income
Pension and postretirement adjustments, net of tax	35	48	65	94
Deferred gain on derivatives, net of tax	(1)	0	(2)	0
Currency translation adjustments, net of tax	3	(20)	14	(27)
Unrealized net gain, net of tax	0	0	0	0
Total other comprehensive income	37	28	77	67
Comprehensive income (loss)	(544)	(99)	(946)	(352)
Comprehensive (income) loss attributable to noncontrolling interests	3	(61)	37	(47)
Comprehensive income (loss) attributable to Holdings’ shareholders	(541)	(160)	(909)	(399)
Parent
Condensed Financial Statements, Captions [Line Items]
Net income (loss)	(581)	(127)	(1,023)	(419)
Other comprehensive income
Pension and postretirement adjustments, net of tax	0	0	0	0
Deferred gain on derivatives, net of tax	(1)		(2)
Currency translation adjustments, net of tax	(1)	0	0	0
Unrealized net gain, net of tax	0	0	0	0
Total other comprehensive income	(2)	0	(2)	0
Comprehensive income (loss)	(583)	(127)	(1,025)	(419)
Comprehensive (income) loss attributable to noncontrolling interests	0	0	0	0
Comprehensive income (loss) attributable to Holdings’ shareholders	(583)	(127)	(1,025)	(419)
Guarantor Subsidiaries
Condensed Financial Statements, Captions [Line Items]
Net income (loss)	(619)	(154)	(1,117)	(477)
Other comprehensive income
Pension and postretirement adjustments, net of tax	29	42	57	84
Deferred gain on derivatives, net of tax	0		0
Currency translation adjustments, net of tax	0	0	0	0
Unrealized net gain, net of tax	0	(3)	0	(2)
Total other comprehensive income	29	39	57	82
Comprehensive income (loss)	(590)	(115)	(1,060)	(395)
Comprehensive (income) loss attributable to noncontrolling interests	0	0	0	0
Comprehensive income (loss) attributable to Holdings’ shareholders	(590)	(115)	(1,060)	(395)
Non-Guarantor Subsidiaries
Condensed Financial Statements, Captions [Line Items]
Net income (loss)	217	364	373	577
Other comprehensive income
Pension and postretirement adjustments, net of tax	6	6	8	10
Deferred gain on derivatives, net of tax	0		0
Currency translation adjustments, net of tax	4	(20)	14	(27)
Unrealized net gain, net of tax	161	(100)	112	(44)
Total other comprehensive income	171	(114)	134	(61)
Comprehensive income (loss)	388	250	507	516
Comprehensive (income) loss attributable to noncontrolling interests	0	0	0	0
Comprehensive income (loss) attributable to Holdings’ shareholders	388	250	507	516
Eliminations
Condensed Financial Statements, Captions [Line Items]
Net income (loss)	402	(210)	744	(100)
Other comprehensive income
Pension and postretirement adjustments, net of tax	0	0	0	0
Deferred gain on derivatives, net of tax	0		0
Currency translation adjustments, net of tax	0	0	0	0
Unrealized net gain, net of tax	(161)	103	(112)	46
Total other comprehensive income	(161)	103	(112)	46
Comprehensive income (loss)	241	(107)	632	(54)
Comprehensive (income) loss attributable to noncontrolling interests	3	(61)	37	(47)
Comprehensive income (loss) attributable to Holdings’ shareholders	$ 244	$ (168)	$ 669	$ (101)

XML

BORROWINGS (Unsecured Commercial Paper) (Details) (USD $) In Millions, unless otherwise specified	Aug. 02, 2014	Feb. 01, 2014	Aug. 03, 2013
Debt Instrument [Line Items]
Unsecured commercial paper	$ 7	$ 9	$ 247
Sears Roebuck Acceptance Corp [Member] | Esl Investments Inc [Member]
Debt Instrument [Line Items]
Unsecured commercial paper	0	0	235
Sears Roebuck Acceptance Corp [Member] | Edward S Lampert [Member]
Debt Instrument [Line Items]
Unsecured commercial paper	$ 0	$ 0	$ 143

XML

GUARANTOR/NON-GUARANTOR SUBSIDIARY FINANCIAL INFORMATION

6 Months Ended

Aug. 02, 2014

Condensed Financial Information of Parent Company Only Disclosure [Abstract]

GUARANTOR/NON-GUARANTOR SUBSIDIARY FINANCIAL INFORMATION

GUARANTOR/NON-GUARANTOR SUBSIDIARY FINANCIAL INFORMATION

At August 2, 2014, the principal amount outstanding of the Company’s 65/8% senior secured notes due 2018 was $1.24 billion. These notes were issued in 2010 by Sears Holdings Corporation (“Parent”). The notes are guaranteed by certain of our 100% owned domestic subsidiaries that own the collateral for the notes, as well as by SRAC (the “guarantor subsidiaries”). The following condensed consolidated financial information presents the Condensed Consolidating Balance Sheets at August 2, 2014, August 3, 2013 and February 1, 2014, the Condensed Consolidating Statements of Operations and the Condensed Consolidating Statements of Comprehensive Income (Loss) for the 13- and 26- week periods ended August 2, 2014 and August 3, 2013, and the Condensed Consolidating Statements of Cash flows for the 13- and 26- week periods ended August 2, 2014 and August 3, 2013 of (i) Parent; (ii) the guarantor subsidiaries; (iii) the non-guarantor subsidiaries; (iv) eliminations and (v) the Company on a consolidated basis.

On April 4, 2014, we completed the separation of our Lands' End business through a spin-off transaction. The following condensed consolidated financial statements had total assets and liabilities of approximately $1.1 billion and $395 million, respectively, at August 3, 2013 and total assets and liabilities of approximately $1.1 billion and $385 million, respectively, at February 1, 2014, attributable to the Lands' End domestic business. Merchandise sales and services included revenues of approximately $185 million from the Lands' End domestic business for the 26- week period ended August 2, 2014, and approximately $280 million and $545 million, respectively, for the 13- and 26- week periods ended August 3, 2013. Net loss attributable to Holdings' shareholders included net income of approximately $5 million from the Lands' End domestic business for the 26- week period ended August 2, 2014, and approximately $10 million and $15 million, respectively, for the 13- and 26- week periods ended August 3, 2013. The financial information for the domestic portion of Lands' End business is reflected within the guarantor subsidiaries balances for these periods, while the international portion is reflected within the non-guarantor subsidiaries balances for these periods.

The principal elimination entries relate to investments in subsidiaries and intercompany balances and transactions including transactions with our wholly-owned non-guarantor insurance subsidiary. The Company has accounted for investments in subsidiaries under the equity method. The guarantor subsidiaries are 100% owned directly or indirectly by the Parent and all guarantees are joint, several and unconditional. Additionally, the notes are secured by a security interest in certain assets consisting primarily of domestic inventory and credit card receivables of the guarantor subsidiaries, and consequently may not be available to satisfy the claims of the Company’s general creditors. Certain investments primarily held by non-guarantor subsidiaries are recorded by the issuers at historical cost and are recorded at fair value by the holder.

Condensed Consolidating Balance Sheet

August 2, 2014

millions	Parent		Guarantor Subsidiaries		Non- Guarantor Subsidiaries		Eliminations			Consolidated
Current assets
Cash and cash equivalents	$	—	$	565	$	264	$	—		$	829
Intercompany receivables	—		—		26,369		(26,369		)	—
Accounts receivable	—		397		119		—			516
Merchandise inventories	—		5,783		600		—			6,383
Prepaid expenses and other current assets	43		971		451		(1,036		)	429
Total current assets	43		7,716		27,803		(27,405		)	8,157
Total property and equipment, net	—		3,680		1,411		—			5,091
Goodwill and intangible assets	—		288		2,283		—			2,571
Other assets	12		427		2,742		(2,562		)	619
Investment in subsidiaries	13,638		25,474		—		(39,112		)	—
TOTAL ASSETS	$	13,693	$	37,585	$	34,239	$	(69,079	)	$	16,438
Current liabilities
Short-term borrowings	$	—	$	1,404	$	—	$	—		$	1,404
Current portion of long-term debt and capitalized lease obligations	—		72		13		—			85
Merchandise payables	—		2,239		267		—			2,506
Intercompany payables	12,112		14,257		—		(26,369		)	—
Short-term deferred tax liabilities	2		504		—		(22		)	484
Other current liabilities	25		2,362		2,325		(1,013		)	3,699
Total current liabilities	12,139		20,838		2,605		(27,404		)	8,178
Long-term debt and capitalized lease obligations	1,238		3,805		70		(2,298		)	2,815
Pension and postretirement benefits	—		1,480		241		—			1,721
Long-term deferred tax liabilities	—		—		1,006		(208		)	798
Other long-term liabilities	—		794		1,466		(253		)	2,007
Total Liabilities	13,377		26,917		5,388		(30,163		)	15,519
EQUITY
Shareholder’s equity	316		10,668		28,851		(39,323		)	512
Noncontrolling interest	—		—		—		407			407
Total Equity	316		10,668		28,851		(38,916		)	919
TOTAL LIABILITIES AND EQUITY	$	13,693	$	37,585	$	34,239	$	(69,079	)	$	16,438

Condensed Consolidating Balance Sheet

August 3, 2013

millions	Parent		Guarantor Subsidiaries		Non- Guarantor Subsidiaries		Eliminations			Consolidated
Current assets
Cash and cash equivalents	$	—	$	336	$	335	$	—		$	671
Intercompany receivables	—		—		26,087		(26,087		)	—
Accounts receivable	—		530		111		—			641
Merchandise inventories	—		6,856		852		—			7,708
Prepaid expenses and other current assets	92		1,093		470		(1,175		)	480
Total current assets	92		8,815		27,855		(27,262		)	9,500
Total property and equipment, net	—		4,241		1,545		—			5,786
Goodwill and intangible assets	—		955		2,288		—			3,243
Other assets	15		227		2,905		(2,398		)	749
Investment in subsidiaries	15,822		25,301		—		(41,123		)	—
TOTAL ASSETS	$	15,929	$	39,539	$	34,593	$	(70,783	)	$	19,278
Current liabilities
Short-term borrowings	$	—	$	1,756	$	—	$	—		$	1,756
Current portion of long-term debt and capitalized lease obligations	—		60		15		—			75
Merchandise payables	—		2,530		373		—			2,903
Intercompany payables	12,442		13,645		—		(26,087		)	—
Short-term deferred tax liabilities	3		412		—		(33		)	382
Other current liabilities	26		2,405		2,555		(1,142		)	3,844
Total current liabilities	12,471		20,808		2,943		(27,262		)	8,960
Long-term debt and capitalized lease obligations	1,237		2,923		101		(2,350		)	1,911
Pension and postretirement benefits	—		2,150		389		—			2,539
Long-term deferred tax liabilities	—		8		889		66			963
Other long-term liabilities	—		826		1,508		(253		)	2,081
Total Liabilities	13,708		26,715		5,830		(29,799		)	16,454
EQUITY
Shareholder’s equity	2,221		12,824		28,763		(41,448		)	2,360
Noncontrolling interest	—		—		—		464			464
Total Equity	2,221		12,824		28,763		(40,984		)	2,824
TOTAL LIABILITIES AND EQUITY	$	15,929	$	39,539	$	34,593	$	(70,783	)	$	19,278

Condensed Consolidating Balance Sheet

February 1, 2014

millions	Parent		Guarantor Subsidiaries		Non- Guarantor Subsidiaries		Eliminations			Consolidated
Current assets
Cash and cash equivalents	$	—	$	537	$	491	$	—		$	1,028
Intercompany receivables	—		—		25,884		(25,884		)	—
Accounts receivable	—		425		128		—			553
Merchandise inventories	—		6,356		678		—			7,034
Prepaid expenses and other current assets	44		873		375		(948		)	344
Total current assets	44		8,191		27,556		(26,832		)	8,959
Total property and equipment, net	—		3,906		1,488		—			5,394
Goodwill and intangible assets	—		944		2,285		—			3,229
Other assets	13		240		2,603		(2,177		)	679
Investment in subsidiaries	14,743		25,303		—		(40,046		)	—
TOTAL ASSETS	$	14,800	$	38,584	$	33,932	$	(69,055	)	$	18,261
Current liabilities
Short-term borrowings	$	—	$	1,332	$	—	$	—		$	1,332
Current portion of long-term debt and capitalized lease obligations	—		70		13		—			83
Merchandise payables	—		2,213		283		—			2,496
Intercompany payables	12,103		13,781		—		(25,884		)	—
Short-term deferred tax liabilities	2		408		—		(23		)	387
Other current liabilities	26		2,412		2,374		(925		)	3,887
Total current liabilities	12,131		20,216		2,670		(26,832		)	8,185
Long-term debt and capitalized lease obligations	1,238		3,781		76		(2,261		)	2,834
Pension and postretirement benefits	—		1,681		261		—			1,942
Long-term deferred tax liabilities	—		128		955		26			1,109
Other long-term liabilities	—		805		1,453		(250		)	2,008
Total Liabilities	13,369		26,611		5,415		(29,317		)	16,078
EQUITY
Shareholder’s equity	1,431		11,973		28,517		(40,182		)	1,739
Noncontrolling interest	—		—		—		444			444
Total Equity	1,431		11,973		28,517		(39,738		)	2,183
TOTAL LIABILITIES AND EQUITY	$	14,800	$	38,584	$	33,932	$	(69,055	)	$	18,261

Condensed Consolidating Statement of Operations

For the 13 Weeks Ended August 2, 2014

millions	Parent			Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Eliminations			Consolidated
Merchandise sales and services	$	—		$	7,315		$	1,530		$	(832	)	$	8,013
Cost of sales, buying and occupancy	—			5,793			903			(425		)	6,271
Selling and administrative	1			2,079			445			(407		)	2,118
Depreciation and amortization	—			115			37			—			152
Impairment charges	—			5			15			—			20
Gain on sales of assets	—			(34		)	—			—			(34		)
Total costs and expenses	1			7,958			1,400			(832		)	8,527
Operating income (loss)	(1		)	(643		)	130			—			(514		)
Interest expense	(53		)	(111		)	(52		)	144			(72		)
Interest and investment income	—			9			167			(144		)	32
Other income	—			—			5			—			5
Income (loss) before income taxes	(54		)	(745		)	250			—			(549		)
Income tax (expense) benefit	—			1			(33		)	—			(32		)
Equity (deficit) in earnings in subsidiaries	(527		)	125			—			402			—
Net income (loss)	(581		)	(619		)	217			402			(581		)
Loss attributable to noncontrolling interests	—			—			—			8			8
NET INCOME (LOSS) ATTRIBUTABLE TO HOLDINGS’ SHAREHOLDERS	$	(581	)	$	(619	)	$	217		$	410		$	(573	)

Condensed Consolidating Statement of Operations

For the 13 Weeks Ended August 3, 2013

millions	Parent			Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Eliminations			Consolidated
Merchandise sales and services	$	—		$	8,030		$	1,780		$	(939	)	$	8,871
Cost of sales, buying and occupancy	—			6,121			1,037			(473		)	6,685
Selling and administrative	1			2,219			537			(466		)	2,291
Depreciation and amortization	—			142			45			—			187
Gain on sales of assets	—			(60		)	(181		)	—			(241		)
Total costs and expenses	1			8,422			1,438			(939		)	8,922
Operating income (loss)	(1		)	(392		)	342			—			(51		)
Interest expense	(55		)	(90		)	(22		)	108			(59		)
Interest and investment income	—			10			112			(108		)	14
Other loss	—			—			(1		)	—			(1		)
Income (loss) before income taxes	(56		)	(472		)	431			—			(97		)
Income tax (expense) benefit	—			37			(67		)	—			(30		)
Equity (deficit) in earnings in subsidiaries	(71		)	281			—			(210		)	—
Net income (loss)	(127		)	(154		)	364			(210		)	(127		)
Income attributable to noncontrolling interests	—			—			—			(67		)	(67		)
NET INCOME (LOSS) ATTRIBUTABLE TO HOLDINGS’ SHAREHOLDERS	$	(127	)	$	(154	)	$	364		$	(277	)	$	(194	)

Condensed Consolidating Statement of Operations

For the 26 Weeks Ended August 2, 2014

millions	Parent			Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Eliminations			Consolidated
Merchandise sales and services	$	—		$	14,516		$	3,052		$	(1,676	)	$	15,892
Cost of sales, buying and occupancy	—			11,407			1,760			(845		)	12,322
Selling and administrative	1			4,070			967			(831		)	4,207
Depreciation and amortization	—			231			76			—			307
Impairment charges	—			10			15			—			25
Gain on sales of assets	—			(67		)	(13		)	—			(80		)
Total costs and expenses	1			15,651			2,805			(1,676		)	16,781
Operating income (loss)	(1		)	(1,135		)	247			—			(889		)
Interest expense	(104		)	(221		)	(47		)	229			(143		)
Interest and investment income	—			18			247			(229		)	36
Other income	—			—			2			—			2
Income (loss) before income taxes	(105		)	(1,338		)	449			—			(994		)
Income tax (expense) benefit	—			47			(76		)	—			(29		)
Equity (deficit) in earnings in subsidiaries	(918		)	174			—			744			—
Net income (loss)	(1,023		)	(1,117		)	373			744			(1,023		)
Loss attributable to noncontrolling interests	—			—			—			48			48
NET INCOME (LOSS) ATTRIBUTABLE TO HOLDINGS’ SHAREHOLDERS	$	(1,023	)	$	(1,117	)	$	373		$	792		$	(975	)

Condensed Consolidating Statement of Operations

For the 26 Weeks Ended August 3, 2013

millions	Parent			Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Eliminations			Consolidated
Merchandise sales and services	$	—		$	15,608		$	3,475		$	(1,760	)	$	17,323
Cost of sales, buying and occupancy	—			11,888			1,949			(856		)	12,981
Selling and administrative	1			4,306			1,106			(904		)	4,509
Depreciation and amortization	—			286			92			—			378
Impairment charges	—			8			—			—			8
Gain on sales of assets	—			(74		)	(181		)	—			(255		)
Total costs and expenses	1			16,414			2,966			(1,760		)	17,621
Operating income (loss)	(1		)	(806		)	509			—			(298		)
Interest expense	(110		)	(184		)	(48		)	222			(120		)
Interest and investment income	—			19			224			(222		)	21
Other loss	—			—			(1		)	—			(1		)
Income (loss) before income taxes	(111		)	(971		)	684			—			(398		)
Income tax (expense) benefit	—			86			(107		)	—			(21		)
Equity (deficit) in earnings in subsidiaries	(308		)	408			—			(100		)	—
Net income (loss)	(419		)	(477		)	577			(100		)	(419		)
Income attributable to noncontrolling interests	—			—			—			(54		)	(54		)
NET INCOME (LOSS) ATTRIBUTABLE TO HOLDINGS’ SHAREHOLDERS	$	(419	)	$	(477	)	$	577		$	(154	)	$	(473	)

Condensed Consolidating Statement of Comprehensive Income (Loss)

For the 13 Weeks Ended August 2, 2014

millions	Parent			Guarantor Subsidiaries			Non- Guarantor Subsidiaries		Eliminations			Consolidated
Net income (loss)	$	(581	)	$	(619	)	$	217	$	402		$	(581	)
Other comprehensive income (loss)
Pension and postretirement adjustments, net of tax	—			29			6		—			35
Deferred loss on derivatives, net of tax	(1		)	—			—		—			(1		)
Currency translation adjustments, net of tax	(1		)	—			4		—			3
Unrealized net gain, net of tax	—			—			161		(161		)	—
Total other comprehensive income (loss)	(2		)	29			171		(161		)	37
Comprehensive income (loss)	(583		)	(590		)	388		241			(544		)
Comprehensive loss attributable to noncontrolling interests	—			—			—		3			3
Comprehensive income (loss) attributable to Holdings’ shareholders	$	(583	)	$	(590	)	$	388	$	244		$	(541	)

Condensed Consolidating Statement of Comprehensive Income (Loss)

For the 13 Weeks Ended August 3, 2013

millions	Parent			Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Eliminations			Consolidated
Net income (loss)	$	(127	)	$	(154	)	$	364		$	(210	)	$	(127	)
Other comprehensive income (loss)
Pension and postretirement adjustments, net of tax	—			42			6			—			48
Currency translation adjustments, net of tax	—			—			(20		)	—			(20		)
Unrealized net loss, net of tax	—			(3		)	(100		)	103			—
Total other comprehensive income (loss)	—			39			(114		)	103			28
Comprehensive income (loss)	(127		)	(115		)	250			(107		)	(99		)
Comprehensive income attributable to noncontrolling interests	—			—			—			(61		)	(61		)
Comprehensive income (loss) attributable to Holdings’ shareholders	$	(127	)	$	(115	)	$	250		$	(168	)	$	(160	)

Condensed Consolidating Statement of Comprehensive Income (Loss)

For the 26 Weeks Ended August 2, 2014

millions	Parent			Guarantor Subsidiaries			Non- Guarantor Subsidiaries		Eliminations			Consolidated
Net income (loss)	$	(1,023	)	$	(1,117	)	$	373	$	744		$	(1,023	)
Other comprehensive income (loss)
Pension and postretirement adjustments, net of tax	—			57			8		—			65
Deferred loss on derivatives, net of tax	(2		)	—			—		—			(2		)
Currency translation adjustments, net of tax	—			—			14		—			14
Unrealized net gain, net of tax	—			—			112		(112		)	—
Total other comprehensive income (loss)	(2		)	57			134		(112		)	77
Comprehensive income (loss)	(1,025		)	(1,060		)	507		632			(946		)
Comprehensive loss attributable to noncontrolling interests	—			—			—		37			37
Comprehensive income (loss) attributable to Holdings’ shareholders	$	(1,025	)	$	(1,060	)	$	507	$	669		$	(909	)

Condensed Consolidating Statement of Comprehensive Income (Loss)

For the 26 Weeks Ended August 3, 2013

millions	Parent			Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Eliminations			Consolidated
Net income (loss)	$	(419	)	$	(477	)	$	577		$	(100	)	$	(419	)
Other comprehensive income (loss)
Pension and postretirement adjustments, net of tax	—			84			10			—			94
Currency translation adjustments, net of tax	—			—			(27		)	—			(27		)
Unrealized net loss, net of tax	—			(2		)	(44		)	46			—
Total other comprehensive income (loss)	—			82			(61		)	46			67
Comprehensive income (loss)	(419		)	(395		)	516			(54		)	(352		)
Comprehensive income attributable to noncontrolling interests	—			—			—			(47		)	(47		)
Comprehensive income (loss) attributable to Holdings’ shareholders	$	(419	)	$	(395	)	$	516		$	(101	)	$	(399	)

Condensed Consolidating Statement of Cash Flows

For the 26 Weeks Ended August 2, 2014

millions	Parent			Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Eliminations			Consolidated
Net cash provided by (used in) operating activities	$	92		$	(1,029	)	$	290		$	(100	)	$	(747	)
Proceeds from sales of property and investments	—			133			31			—			164
Purchases of property and equipment	—			(107		)	(19		)	—			(126		)
Net investing with Affiliates	(92		)	—			(429		)	521			—
Net cash provided by (used in) investing activities	(92		)	26			(417		)	521			38
Repayments of long-term debt	—			(35		)	(7		)	—			(42		)
Increase in short-term borrowings, primarily 90 days or less	—			72			—			—			72
Lands' End, Inc. pre-separation funding	—			515			—			—			515
Separation of Lands' End, Inc.	—			(31		)	—			—			(31		)
Debt issuance costs	—			(11		)	—			—			(11		)
Intercompany dividend	—			—			(100		)	100			—
Net borrowing with Affiliates	—			521			—			(521		)	—
Net cash provided by (used in) financing activities	—			1,031			(107		)	(421		)	503
Effect of exchange rate changes on cash and cash equivalents	—			—			7			—			7
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS	—			28			(227		)	—			(199		)
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR	—			537			491			—			1,028
CASH AND CASH EQUIVALENTS, END OF PERIOD	$	—		$	565		$	264		$	—		$	829

Condensed Consolidating Statement of Cash Flows

For the 26 Weeks Ended August 3, 2013

millions	Parent			Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Eliminations			Consolidated
Net cash provided by (used in) operating activities	$	—		$	(1,213	)	$	498		$	—		$	(715	)
Proceeds from sales of property and investments	—			100			187			—			287
Net increase in investments and restricted cash	—			—			(1		)	—			(1		)
Purchases of property and equipment	—			(101		)	(15		)	—			(116		)
Net investing with Affiliates	—			—			45			(45		)	—
Net cash provided by (used in) investing activities	—			(1		)	216			(45		)	170
Proceeds from debt issuances	—			—			2			—			2
Repayments of long-term debt	—			(39		)	(7		)	—			(46		)
Increase in short-term borrowings, primarily 90 days or less	—			662			—			—			662
Intercompany dividend	257			21			(278		)	—			—
Net borrowing with Affiliates	(257		)	586			(374		)	45			—
Net cash provided by (used in) financing activities	—			1,230			(657		)	45			618
Effect of exchange rate changes on cash and cash equivalents	—			—			(11		)	—			(11		)
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS	—			16			46			—			62
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR	—			320			289			—			609
CASH AND CASH EQUIVALENTS, END OF PERIOD	$	—		$	336		$	335		$	—		$	671

XML

BORROWINGS (Domestic Credit Agreement) (Details) (USD $)				3 Months Ended			3 Months Ended					3 Months Ended			3 Months Ended		3 Months Ended
	Aug. 02, 2014	Feb. 01, 2014	Aug. 03, 2013	Nov. 02, 2013 Secured Debt [Member]	Nov. 02, 2013 Domestic Credit Agreement	Apr. 30, 2011 Domestic Credit Agreement	Apr. 30, 2011 Domestic Credit Agreement	Aug. 02, 2014 Domestic Credit Agreement	Feb. 01, 2014 Domestic Credit Agreement	Aug. 03, 2013 Domestic Credit Agreement	Aug. 02, 2014 Domestic Credit Agreement Second Lien	Apr. 30, 2011 Minimum Domestic Credit Agreement	Apr. 30, 2011 Maximum Domestic Credit Agreement	Apr. 30, 2011 Domestic Credit Agreement [Member] Letter of Credit	Nov. 02, 2013 Term Loan [Member] Secured Debt [Member]	Aug. 02, 2014 Term Loan [Member] Secured Debt [Member]	Apr. 30, 2011 London Interbank Offered Rate (LIBOR) [Member] Minimum Domestic Credit Agreement	Apr. 30, 2011 London Interbank Offered Rate (LIBOR) [Member] Maximum Domestic Credit Agreement	Nov. 02, 2013 London Interbank Offered Rate (LIBOR) [Member] Term Loan [Member] Secured Debt [Member]	Nov. 02, 2013 London Interbank Offered Rate (LIBOR) [Member] Term Loan [Member] Minimum Secured Debt [Member]	Apr. 30, 2011 Base Rate [Member] Minimum Domestic Credit Agreement	Apr. 30, 2011 Base Rate [Member] Maximum Domestic Credit Agreement	Nov. 02, 2013 Base Rate [Member] Term Loan [Member] Minimum Secured Debt [Member]	Nov. 02, 2013 Federal Funds Rate [Member] Term Loan [Member] Secured Debt [Member]
Debt Instrument [Line Items]
Line of Credit Facility, Maximum Borrowing Capacity						$ 2,000,000,000	$ 3,275,000,000							$ 1,500,000,000
Debt Instrument, Face Amount															1,000,000,000
Credit agreement, interest rates margin																	2.00%	2.50%		1.00%	1.00%	1.50%		0.50%
Debt Instrument, Applicable Margin on Variable Rate																				4.50%			3.50%
Debt Instrument, Periodic Payment															2,500,000
Prepayment Premium				1.00%
Commitment fees												0.375%	0.625%
Line of Credit Facility, Amount Outstanding	1,397,000,000	1,323,000,000	1,509,000,000					1,400,000,000	1,300,000,000	1,500,000,000	1,200,000,000
Letters of Credit Outstanding, Amount								646,000,000	661,000,000	680,000,000
Line of Credit Facility, Remaining Borrowing Capacity								240,000,000	549,000,000	759,000,000	760,000,000
Long-term Debt																$ 1,000,000,000
Debt Instrument, Floor Interest Rate																			1.00%
Limit of availability under the credit facility to make restricted payments												15.00%
Fixed charge ratio at the last day of any quarter					1.0
Credit agreement, covenant terms							The Domestic Credit Agreement limits our ability to make restricted payments, including dividends and share repurchases, subject to specified exceptions that are available if, in each case, no event of default under the credit facility exists immediately before or after giving effect to the restricted payment. These include exceptions that require that projected availability under the credit facility, as defined, is at least 15% and an exception that requires that the restricted payment is funded from cash on hand and not from borrowings under the credit facility. The Domestic Credit Agreement also imposes various other requirements, which take effect if availability falls below designated thresholds, including a cash dominion requirement and a requirement that the fixed charge ratio at the last day of any quarter be not less than 1.0 to 1.0.

XML

BASIS OF PRESENTATION Schedule of Intangible Assets, Total (Tables)

6 Months Ended

Aug. 02, 2014

Schedule of Intangible Assets, Total [Abstract]

Schedule of Intangible Assets, Total [Table Text Block]

Changes in the carrying amount of trade names and other intangible assets by segment, which reflects the impact related to the Lands’ End spin-off, were as follows:

millions	Sears Domestic			Total
Balance, February 1, 2014:
Trade names and intangible assets	$	2,651		$	2,850
2014 activity:
Separation of Lands' End, Inc.	(531		)	(531		)
Amortization expense and other	(14		)	(17		)
Balance, August 2, 2014	$	2,106		$	2,302

XML

Condensed Consolidated Statements of Equity (USD $) In Millions, unless otherwise specified	Total	Common Stock	Treasury Stock	Capital in Excess of Par Value	Retained Earnings	Accumulated Other Comprehensive Income (Loss)	Noncontrolling Interests
Beginning Balance at Feb. 02, 2013	$ 3,172	$ 1	$ (5,970)	$ 9,298	$ 885	$ (1,459)	$ 417
Beginning Balance (in shares) at Feb. 02, 2013		106
Comprehensive income (loss)
Net income (loss)	(419)				(473)		54
Pension and postretirement adjustments, net of tax	94					89	5
Deferred gain on derivatives, net of tax	0
Currency translation adjustments, net of tax	(27)					(15)	(12)
Comprehensive income (loss)	(352)
Stock awards	2		3	(1)
Associate stock purchase	2		2
Ending Balance at Aug. 03, 2013	2,824	1	(5,965)	9,297	412	(1,385)	464
Ending Balance (in shares) at Aug. 03, 2013		106
Beginning Balance at Feb. 01, 2014	2,183	1	(5,963)	9,298	(480)	(1,117)	444
Beginning Balance (in shares) at Feb. 01, 2014		106
Comprehensive income (loss)
Net income (loss)	(1,023)				(975)		(48)
Pension and postretirement adjustments, net of tax	65					61	4
Deferred gain on derivatives, net of tax	(2)					(2)
Currency translation adjustments, net of tax	14					7	7
Comprehensive income (loss)	(946)
Stock awards	1		3	(2)
Dispostion of Affiliate Shares	(321)			(323)		2
Associate stock purchase	2		2
Ending Balance at Aug. 02, 2014	$ 919	$ 1	$ (5,958)	$ 8,973	$ (1,455)	$ (1,049)	$ 407
Ending Balance (in shares) at Aug. 02, 2014		106

XML

Condensed Consolidated Statements of Comprehensive Income (Loss) (USD $) In Millions, unless otherwise specified	3 Months Ended		6 Months Ended
	Aug. 02, 2014	Aug. 03, 2013	Aug. 02, 2014	Aug. 03, 2013
Net income (loss)	$ (581)	$ (127)	$ (1,023)	$ (419)
Other comprehensive income
Pension and postretirement adjustments, net of tax	35	48	65	94
Deferred gain on derivatives, net of tax	(1)	0	(2)	0
Currency translation adjustments, net of tax	3	(20)	14	(27)
Total other comprehensive income	37	28	77	67
Comprehensive income (loss)	(544)	(99)	(946)	(352)
Comprehensive (income) loss attributable to noncontrolling interests	3	(61)	37	(47)
Comprehensive income (loss) attributable to Holdings’ shareholders	$ (541)	$ (160)	$ (909)	$ (399)

XML

SUMMARY OF SEGMENT DATA

6 Months Ended

Aug. 02, 2014

Segment Reporting [Abstract]

SUMMARY OF SEGMENT DATA

SUMMARY OF SEGMENT DATA

These reportable segment classifications are based on our business formats, as described in Note 1. The Kmart and Sears Canada formats each represent both an operating and reportable segment. The Sears Domestic reportable segment consists of the aggregation of several business formats. These formats are evaluated by our Chief Operating Decision Maker ("CODM") to make decisions about resource allocation and to assess performance.

Each of these segments derives its revenues from the sale of merchandise and related services to customers, primarily in the United States and Canada. The merchandise and service categories are as follows:

(i) Hardlines—consists of home appliances, consumer electronics, lawn & garden, tools & hardware, automotive parts, household goods, toys, housewares and sporting goods;

(ii) Apparel and Soft Home—includes women's, men's, kids', footwear, jewelry, accessories and soft home;

(iii) Food and Drug—consists of grocery & household, pharmacy and drugstore;

(iv) Service—includes repair, installation and automotive service and extended contract revenue; and

(v) Other—includes revenues earned in connection with our agreements with SHO and Lands' End, as well as credit revenues and licensed business revenues.

	13 Weeks Ended August 2, 2014
millions	Kmart			Sears Domestic			Sears Canada			Sears Holdings
Merchandise sales and services
Hardlines	$	892		$	2,362		$	418		$	3,672
Apparel and Soft Home	935			770			325			2,030
Food and Drug	1,075			2			—			1,077
Service	4			612			26			642
Other	17			564			11			592
Total merchandise sales and services	2,923			4,310			780			8,013
Costs and expenses
Cost of sales, buying and occupancy	2,341			3,334			596			6,271
Selling and administrative	729			1,184			205			2,118
Depreciation and amortization	24			110			18			152
Impairment charges	2			3			15			20
Gain on sales of assets	(31		)	(3		)	—			(34		)
Total costs and expenses	3,065			4,628			834			8,527
Operating loss	$	(142	)	$	(318	)	$	(54	)	$	(514	)
Total assets	$	3,730		$	10,778		$	1,930		$	16,438
Capital expenditures	$	7		$	38		$	9		$	54

	13 Weeks Ended August 3, 2013
millions	Kmart			Sears Domestic			Sears Canada			Sears Holdings
Merchandise sales and services
Hardlines	$	977		$	2,458		$	484		$	3,919
Apparel and Soft Home	1,003			1,120			387			2,510
Food and Drug	1,169			3			—			1,172
Service	4			656			36			696
Other	15			546			13			574
Total merchandise sales and services	3,168			4,783			920			8,871
Costs and expenses
Cost of sales, buying and occupancy	2,459			3,544			682			6,685
Selling and administrative	747			1,301			243			2,291
Depreciation and amortization	33			129			25			187
Gain on sales of assets	(15		)	(45		)	(181		)	(241		)
Total costs and expenses	3,224			4,929			769			8,922
Operating income (loss)	$	(56	)	$	(146	)	$	151		$	(51	)
Total assets	$	4,291		$	12,602		$	2,385		$	19,278
Capital expenditures	$	4		$	47		$	5		$	56

	26 Weeks Ended August 2, 2014
millions	Kmart			Sears Domestic			Sears Canada			Sears Holdings
Merchandise sales and services
Hardlines	$	1,709		$	4,513		$	773		$	6,995
Apparel and Soft Home	1,886			1,792			625			4,303
Food and Drug	2,184			4			—			2,188
Service	8			1,196			57			1,261
Other	33			1,090			22			1,145
Total merchandise sales and services	5,820			8,595			1,477			15,892
Costs and expenses
Cost of sales, buying and occupancy	4,643			6,550			1,129			12,322
Selling and administrative	1,420			2,356			431			4,207
Depreciation and amortization	47			224			36			307
Impairment charges	2			8			15			25
(Gain) loss on sales of assets	(52		)	(29		)	1			(80		)
Total costs and expenses	6,060			9,109			1,612			16,781
Operating loss	$	(240	)	$	(514	)	$	(135	)	$	(889	)
Total assets	$	3,730		$	10,778		$	1,930		$	16,438
Capital expenditures	$	20		$	87		$	19		$	126

	26 Weeks Ended August 3, 2013
millions	Kmart			Sears Domestic			Sears Canada			Sears Holdings
Merchandise sales and services
Hardlines	$	1,875		$	4,641		$	925		$	7,441
Apparel and Soft Home	1,996			2,285			741			5,022
Food and Drug	2,359			6			—			2,365
Service	9			1,271			68			1,348
Other	32			1,087			28			1,147
Total merchandise sales and services	6,271			9,290			1,762			17,323
Costs and expenses
Cost of sales, buying and occupancy	4,857			6,837			1,287			12,981
Selling and administrative	1,460			2,556			493			4,509
Depreciation and amortization	66			262			50			378
Impairment charges	—			8			—			8
Gain on sales of assets	(28		)	(46		)	(181		)	(255		)
Total costs and expenses	6,355			9,617			1,649			17,621
Operating income (loss)	$	(84	)	$	(327	)	$	113		$	(298	)
Total assets	$	4,291		$	12,602		$	2,385		$	19,278
Capital expenditures	$	25		$	76		$	15		$	116

XML

Document and Entity Information	6 Months Ended
	Aug. 02, 2014	Aug. 15, 2014
Entity Registrant Name	SEARS HOLDINGS CORP
Entity Central Index Key	0001310067
Current Fiscal Year End Date	--01-31
Entity Filer Category	Large Accelerated Filer
Document Type	10-Q
Document Period End Date	Aug. 02, 2014
Document Fiscal Year Focus	2014
Document Fiscal Period Focus	Q2
Amendment Flag	false
Trading Symbol	SHLD
Entity Common Stock, Shares Outstanding		106,472,251

XML

SUPPLEMENTAL FINANCIAL INFORMATION

6 Months Ended

Aug. 02, 2014

Supplemental Financial Information Disclosure [Abstract]

SUPPLEMENTAL FINANCIAL INFORMATION

SUPPLEMENTAL FINANCIAL INFORMATION

Other long-term liabilities at August 2, 2014, August 3, 2013 and February 1, 2014 consisted of the following:

millions	August 2, 2014		August 3, 2013		February 1, 2014
Unearned revenues	$	836	$	858	$	836
Self-insurance reserves	691		705		686
Other	480		518		486
Total	$	2,007	$	2,081	$	2,008

XML

Condensed Consolidated Balance Sheets (USD $) In Millions, unless otherwise specified	Aug. 02, 2014		Feb. 01, 2014		Aug. 03, 2013
Current assets
Cash and cash equivalents	$ 829		$ 1,028		$ 671
Restricted cash	10		10		10
Accounts receivable	516	[1]	553	[1]	641	[1]
Merchandise inventories	6,383		7,034		7,708
Prepaid expenses and other current assets	419		334		470
Total current assets	8,157		8,959		9,500
Property and equipment, net	5,091		5,394		5,786
Goodwill	269		379		379
Intangible Assets, Net (Excluding Goodwill)	2,302		2,850		2,864
Other assets	619		679		749
TOTAL ASSETS	16,438		18,261		19,278
Current liabilities
Short-term borrowings	1,404	[2]	1,332	[2]	1,756	[2]
Current portion of long-term debt and capitalized lease obligations	85		83		75
Merchandise payables	2,506		2,496		2,903
Other current liabilities	2,374		2,527		2,435
Unearned revenues	889		900		925
Other taxes	436		460		484
Short-term deferred tax liabilities	484		387		382
Total current liabilities	8,178		8,185		8,960
Long-term debt and capitalized lease obligations	2,815	[3]	2,834	[3]	1,911	[3]
Pension and postretirement benefits	1,721		1,942		2,539
Other long-term liabilities	2,007		2,008		2,081
Long-term deferred tax liabilities	798		1,109		963
Total Liabilities	15,519		16,078		16,454
EQUITY
Total Equity	919		2,183		2,824
TOTAL LIABILITIES AND EQUITY	$ 16,438		$ 18,261		$ 19,278

[1] Includes $84 million, $77 million and $68 million at August 2, 2014, August 3, 2013 and February 1, 2014, respectively, of net amounts receivable from SHO.

[2] Includes $235 million of unsecured commercial paper held by ESL and its affiliates at August 3, 2013. ESL and its affiliates held none of our commercial paper at August 2, 2014 or February 1, 2014.

[3] Includes $205 million of senior secured notes held by ESL and its affiliates at August 2, 2014, and $95 million at both August 3, 2013, and February 1, 2014, and $3 million of subsidiary notes held by ESL and its affiliates at August 2, 2014, August 3, 2013, and February 1, 2014.

XML

SEARS CANADA

6 Months Ended

Aug. 02, 2014

Noncontrolling Interest [Abstract]

SEARS CANADA

SEARS CANADA

Sears Holdings Ownership of Sears Canada

At August 2, 2014, August 3, 2013 and February 1, 2014, Sears Holdings was the beneficial holder of approximately 52 million, or 51% of the common shares of Sears Canada.

Sears Canada Share Repurchases

During the second quarter of 2013, Sears Canada renewed its Normal Course Issuer Bid with the Toronto Stock Exchange that permits it to purchase for cancellation up to 5% of its issued and outstanding common shares, representing approximately 5.1 million common shares. The purchase authorization expired on May 23, 2014. There were no share purchases during the 13- and 26- week periods ended August 2, 2014 and August 3, 2013.

Update on our Interest in Sears Canada

On May 14, 2014, we announced that we are exploring strategic alternatives for our 51% interest in Sears Canada, which has a current market value of approximately $765 million as of August 19, 2014, including a potential sale of our interest or Sears Canada as a whole. In connection with these efforts, we engaged BofA Merrill Lynch. Sears Canada's Board of Directors has advised us that Sears Canada's board and management intend to cooperate fully with us in this process to achieve value for all shareholders.

XML

FAIR VALUE OF FINANCIAL ASSETS AND LIABILITIES

6 Months Ended

Aug. 02, 2014

Fair Value Disclosures [Abstract]

FAIR VALUE OF FINANCIAL ASSETS AND LIABILITIES

FAIR VALUE OF FINANCIAL ASSETS AND LIABILITIES

We determine fair value of financial assets and liabilities based on the following fair value hierarchy, which prioritizes the inputs to valuation techniques used to measure fair value into three levels:

Level 1 inputs – unadjusted quoted prices in active markets for identical assets or liabilities that we have the ability to access. An active market for the asset or liability is one in which transactions for the asset or liability occur with sufficient frequency and volume to provide ongoing pricing information.

Level 2 inputs – inputs other than quoted market prices included in Level 1 that are observable, either directly or indirectly, for the asset or liability. Level 2 inputs include, but are not limited to, quoted prices for similar assets or liabilities in an active market, quoted prices for identical or similar assets or liabilities in markets that are not active and inputs other than quoted market prices that are observable for the asset or liability, such as interest rate curves and yield curves observable at commonly quoted intervals, volatilities, credit risk and default rates.

Level 3 inputs – unobservable inputs for the asset or liability.

Accounts receivable, merchandise payables, short-term borrowings, accrued liabilities, cash and domestic cash equivalents are reflected in the Condensed Consolidated Balance Sheets at cost, which approximates fair value due to the short-term nature of these instruments. The fair value of our long-term debt is disclosed in Note 2 to the Condensed Consolidated Financial Statements. The following tables provide the fair value measurement amounts for other financial assets and liabilities recorded in our Condensed Consolidated Balance Sheets at fair value at August 2, 2014, August 3, 2013 and February 1, 2014:

millions	Total Fair Value Amounts at August 2, 2014		Level 1		Level 2		Level 3
Cash equivalents(1)	$	55	$	55	$	—	$	—
Restricted cash(2)	10		10		—		—
Foreign currency derivative assets(3)	4		—		4		—
Total	$	69	$	65	$	4	$	—

millions	Total Fair Value Amounts at August 3, 2013			Level 1		Level 2			Level 3
Cash equivalents(1)	$	211		$	211	$	—		$	—
Restricted cash(2)	10			10		—			—
Foreign currency derivative assets(3)	1			—		1			—
Foreign currency derivative liabilities(4)	(1		)	—		(1		)	—
Total	$	221		$	221	$	—		$	—

millions	Total Fair Value Amounts at February 1, 2014		Level 1		Level 2		Level 3
Cash equivalents(1)	$	346	$	346	$	—	$	—
Restricted cash(2)	10		10		—		—
Foreign currency derivative assets(3)	8		—		8		—
Total	$	364	$	356	$	8	$	—

⁽¹⁾  Included within Cash and cash equivalents in our Condensed Consolidated Balance Sheets.

⁽²⁾  Included within Restricted cash in our Condensed Consolidated Balance Sheets.

⁽³⁾  Included within Prepaid expenses and other current assets in our Condensed Consolidated Balance Sheets.

⁽⁴⁾  Included within Accrued expenses and other current liabilities in our Condensed Consolidated Balance Sheets.

The fair values of derivative assets and liabilities traded in the over-the-counter market are determined using quantitative models that require the use of multiple inputs including interest rates, prices and indices to generate pricing and volatility factors. The predominance of market inputs are actively quoted and can be validated through external sources, including brokers, market transactions and third-party pricing services. Our derivative instruments are valued using Level 2 measurements.

Assets and Liabilities that are Measured at Fair Value on a Nonrecurring Basis

Assets and liabilities that are measured at fair value on a nonrecurring basis relate primarily to our tangible fixed assets, goodwill and other intangible assets, which are remeasured when the derived fair value is below carrying value on our Condensed Consolidated Balance Sheets. For these assets, we do not periodically adjust carrying value to fair value except in the event of impairment. When we determine that impairment has occurred, we measure the impairment and adjust the carrying value. With the exception of the fixed asset impairments described in Note 6, we had no significant remeasurements of such assets or liabilities to fair value during the 13- and 26- week periods ended August 2, 2014 and August 3, 2013.

All of the fair value remeasurements were based on significant unobservable inputs (Level 3). Fixed asset fair values were derived based on discussions with real estate brokers, review of comparable properties, if available, and internal expertise related to the current marketplace conditions.

XML

BASIS OF PRESENTATION Schedule of Goodwill (Tables)

6 Months Ended

Aug. 02, 2014

Goodwill [Line Items]

Schedule of Goodwill [Table Text Block]

Changes in the carrying amount of goodwill by segment, which reflects the impact related to the Lands’ End spin-off, were as follows:

millions	Sears Domestic
Balance, February 1, 2014:
Goodwill	$	379
2014 activity:
Separation of Lands' End, Inc.	(110		)
Balance, August 2, 2014	$	269

XML

LEGAL PROCEEDINGS

6 Months Ended

Aug. 02, 2014

Commitments and Contingencies Disclosure [Abstract]

LEGAL PROCEEDINGS

LEGAL PROCEEDINGS

We are a defendant in several lawsuits containing class or collective action allegations in which the plaintiffs are current and former hourly and salaried associates who allege violations of various wage and hour laws, rules and regulations pertaining to alleged misclassification of certain of our employees and the failure to pay overtime and/or the failure to pay for missed meal and rest periods. The complaints generally seek unspecified monetary damages, injunctive relief, or both. Further, certain of these proceedings are in jurisdictions with reputations for aggressive application of laws and procedures against corporate defendants. We also are a defendant in several putative or certified class action lawsuits in California relating to alleged failure to comply with California laws pertaining to certain operational, marketing and payroll practices. The California laws alleged to have been violated in each of these lawsuits provide the potential for significant statutory penalties. At this time, the Company is not able to either predict the outcome of these lawsuits or reasonably estimate a potential range of loss with respect to the lawsuits.

We are subject to various other legal and governmental proceedings and investigations, including some involving the practices and procedures in our more highly regulated businesses and many involving litigation incidental to those and other businesses. Some matters contain class action allegations, environmental and asbestos exposure allegations and other consumer-based, regulatory or qui tam claims, each of which may seek compensatory, punitive or treble damage claims (potentially in large amounts), as well as other types of relief. Additionally, some of these claims or actions, such as the qui-tam claims, have the potential for significant statutory penalties.

In accordance with accounting standards regarding loss contingencies, we accrue an undiscounted liability for those contingencies where the incurrence of a loss is probable and the amount can be reasonably estimated, and we disclose the amount accrued and the amount of a reasonably possible loss in excess of the amount accrued, if such disclosure is necessary for our financial statements to not be misleading. We do not record liabilities when the likelihood that the liability has been incurred is probable but the amount cannot be reasonably estimated, or when the liability is believed to be only reasonably possible or remote.

Because litigation outcomes are inherently unpredictable, our evaluation of legal proceedings often involves a series of complex assessments by management about future events and can rely heavily on estimates and assumptions. If the assessments indicate that loss contingencies that could be material to any one of our financial statements are not probable, but are reasonably possible, or are probable, but cannot be estimated, then we disclose the nature of the loss contingencies, together with an estimate of the range of possible loss or a statement that such loss is not reasonably estimable. While the consequences of certain unresolved proceedings are not presently determinable, and an estimate of the probable and reasonably possible loss or range of loss in excess of amounts accrued for such proceedings cannot be reasonably made, an adverse outcome from such proceedings could have a material effect on our earnings in any given reporting period. However, in the opinion of our management, after consulting with legal counsel, and taking into account insurance and reserves, the ultimate liability related to current outstanding matters is not expected to have a material effect on our financial position, liquidity or capital resources.

XML

BENEFIT PLANS

6 Months Ended

Aug. 02, 2014

Defined Benefit Pension Plans and Defined Benefit Postretirement Plans Disclosure [Abstract]

BENEFIT PLANS

BENEFIT PLANS

Pension and Postretirement Benefit Plans

We provide benefits to certain associates who are eligible under various defined benefit pension plans, contributory defined benefit pension plans and other postretirement plans, primarily retiree medical benefits. For purposes of determining the periodic expense of our defined benefit plans, we use the fair value of plan assets as the market related value. The following table summarizes the components of total net periodic benefit expense, recorded within Selling and administrative on the Condensed Consolidated Statements of Operations, for our retirement plans:

	13 Weeks Ended						26 Weeks Ended
millions	August 2, 2014			August 3, 2013			August 2, 2014			August 3, 2013
Components of net periodic expense:
Interest cost	$	82		$	75		$	151		$	150
Expected return on plan assets	(92		)	(77		)	(169		)	(154		)
Amortization of experience losses	31			49			62			97
Net periodic expense	$	21		$	47		$	44		$	93

Contributions

During the 13- and 26- week periods ended August 2, 2014, we made total contributions of $103 million and $205 million, respectively, to our pension and postretirement plans. During the 13- and 26- week periods ended August 3, 2013, we made total contributions of $87 million and $176 million, respectively, to our pension and postretirement plans. We anticipate making aggregate contributions to our domestic and Canadian defined benefit and postretirement plans of approximately $255 million over the remainder of 2014, which is lower than previously anticipated due to new legislation which was recently enacted that amends existing funding requirements for our domestic pension plans.

XML

Condensed Consolidating Statement of Cash Flows (Detail) (USD $) In Millions, unless otherwise specified	6 Months Ended
	Aug. 02, 2014	Aug. 03, 2013
Condensed Financial Statements, Captions [Line Items]
Net Cash Provided by (Used in) Operating Activities	$ (747)	$ (715)
Proceeds from sales of property and investments	164	287
Net increase in investments and restricted cash	0	(1)
Purchases of property and equipment	(126)	(116)
Net investing with Affiliates	0	0
Net Cash Provided by (Used in) Investing Activities	38	170
Proceeds from debt issuances	0	2
Repayments of long-term debt	(42)	(46)
Increase (decrease) in short-term borrowings, primarily 90 days or less	72	662
Proceeds from Dividend from Affiliate	515	0
Cash Dividend in Connection with Spin-Off	31	0
Intercompany dividend	0
Payments of Debt Issuance Costs	(11)	0
Purchase of Sears Canada shares		0
Net borrowing with Affiliates	0	0
Net Cash Provided by (Used in) Financing Activities	503	618
Effect of exchange rate changes on cash and cash equivalents	7	(11)
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS	(199)	62
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR	1,028	609
CASH AND CASH EQUIVALENTS, END OF PERIOD	829	671
Parent
Condensed Financial Statements, Captions [Line Items]
Net Cash Provided by (Used in) Operating Activities	92	0
Proceeds from sales of property and investments	0	0
Net increase in investments and restricted cash		0
Purchases of property and equipment	0	0
Net investing with Affiliates	(92)	0
Net Cash Provided by (Used in) Investing Activities	(92)	0
Proceeds from debt issuances		0
Repayments of long-term debt	0	0
Increase (decrease) in short-term borrowings, primarily 90 days or less	0	0
Intercompany dividend	0
Payments of Debt Issuance Costs	0
Purchase of Sears Canada shares		257
Net borrowing with Affiliates	0	(257)
Net Cash Provided by (Used in) Financing Activities	0	0
Effect of exchange rate changes on cash and cash equivalents	0	0
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS	0	0
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR	0	0
CASH AND CASH EQUIVALENTS, END OF PERIOD	0	0
Guarantor Subsidiaries
Condensed Financial Statements, Captions [Line Items]
Net Cash Provided by (Used in) Operating Activities	(1,029)	(1,213)
Proceeds from sales of property and investments	133	100
Net increase in investments and restricted cash		0
Purchases of property and equipment	(107)	(101)
Net investing with Affiliates	0	0
Net Cash Provided by (Used in) Investing Activities	26	(1)
Proceeds from debt issuances		0
Repayments of long-term debt	(35)	(39)
Increase (decrease) in short-term borrowings, primarily 90 days or less	72	662
Proceeds from Dividend from Affiliate	515
Cash Dividend in Connection with Spin-Off	31
Intercompany dividend	0
Payments of Debt Issuance Costs	(11)
Purchase of Sears Canada shares		21
Net borrowing with Affiliates	521	586
Net Cash Provided by (Used in) Financing Activities	1,031	1,230
Effect of exchange rate changes on cash and cash equivalents	0	0
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS	28	16
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR	537	320
CASH AND CASH EQUIVALENTS, END OF PERIOD	565	336
Non-Guarantor Subsidiaries
Condensed Financial Statements, Captions [Line Items]
Net Cash Provided by (Used in) Operating Activities	290	498
Proceeds from sales of property and investments	31	187
Net increase in investments and restricted cash		(1)
Purchases of property and equipment	(19)	(15)
Net investing with Affiliates	(429)	45
Net Cash Provided by (Used in) Investing Activities	(417)	216
Proceeds from debt issuances		2
Repayments of long-term debt	(7)	(7)
Increase (decrease) in short-term borrowings, primarily 90 days or less	0	0
Intercompany dividend	(100)
Payments of Debt Issuance Costs	0
Purchase of Sears Canada shares		(278)
Net borrowing with Affiliates	0	(374)
Net Cash Provided by (Used in) Financing Activities	(107)	(657)
Effect of exchange rate changes on cash and cash equivalents	7	(11)
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS	(227)	46
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR	491	289
CASH AND CASH EQUIVALENTS, END OF PERIOD	264	335
Eliminations
Condensed Financial Statements, Captions [Line Items]
Net Cash Provided by (Used in) Operating Activities	(100)	0
Proceeds from sales of property and investments	0	0
Net increase in investments and restricted cash		0
Purchases of property and equipment	0	0
Net investing with Affiliates	521	(45)
Net Cash Provided by (Used in) Investing Activities	521	(45)
Proceeds from debt issuances		0
Repayments of long-term debt	0	0
Increase (decrease) in short-term borrowings, primarily 90 days or less	0	0
Intercompany dividend	100
Payments of Debt Issuance Costs	0
Purchase of Sears Canada shares		0
Net borrowing with Affiliates	(521)	45
Net Cash Provided by (Used in) Financing Activities	(421)	45
Effect of exchange rate changes on cash and cash equivalents	0	0
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS	0	0
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR	0	0
CASH AND CASH EQUIVALENTS, END OF PERIOD	$ 0	$ 0

XML

STORE CLOSING COSTS, IMPAIRMENTS AND REAL ESTATE TRANSACTIONS

6 Months Ended

Aug. 02, 2014

Store Closing Costs, Impairments and Real Estate Transactions [Abstract]

Store Closing Costs, Impairments and Real Estate Transactions [Text Block]

STORE CLOSING CHARGES, IMPAIRMENTS AND REAL ESTATE TRANSACTIONS

In accordance with accounting standards governing costs associated with exit or disposal activities, expenses related to future rent payments for which we no longer intend to receive any economic benefit are accrued for when we cease to use the leased space and have been reduced for any income that we believe can be realized through sub-leasing the leased space. During the second quarter of 2014, we closed 46 stores in our Kmart segment and eight stores in our Sears Domestic segment we previously announced would close, and recorded charges for the related lease obligations of $11 million for 46 of these stores in our Kmart segment and $2 million for five of these stores in our Sears Domestic segment. During the first half of 2014, we closed 75 stores in our Kmart segment and 21 stores in our Sears Domestic segment we previously announced would close, and recorded charges for the related lease obligations of $11 million for 51 of these stores in our Kmart segment and $3 million for 12 of these stores in our Sears Domestic segment.

We expect to record additional charges of approximately $16 million during the remainder of 2014 related to stores we had previously made the decision to close.

During the second quarter of 2013, we closed 16 stores in our Kmart segment and 10 stores in our Sears Domestic segment we previously announced would close. During the first half of 2013, we closed 27 stores in our Kmart segment and 10 stores in our Sears Domestic segment we previously announced would close, and recorded charges for the related lease obligations of $1 million for four of these stores in our Kmart segment.

We made the decision to close 26 stores in our Kmart segment and two stores in our Sears Domestic segment during the second quarter of 2014, and 40 stores in our Kmart segment and six stores in our Sears Domestic segment during the first half of 2014.

We made the decision to close 12 stores in our Kmart segment and six stores in our Sears Domestic segment during the second quarter of 2013, and 25 stores in our Kmart segment and 12 stores in our Sears Domestic segment during the first half of 2013.

Store closing costs and severance recorded for the 13- and 26- week periods ended August 2, 2014 and August 3, 2013 were as follows:

millions	Markdowns(1)		Severance Costs(2)		Lease Termination Costs(2)			Other Charges(2)		Impairment and Accelerated Depreciation(3)		Total Store Closing Costs
Kmart	$	10	$	3	$	11		$	3	$	3	$	30
Sears Domestic	—		2		4			1		3		10
Sears Canada	1		4		—			—		—		5
Total for the 13-week period ended August 2, 2014	$	11	$	9	$	15		$	4	$	6	$	45
Kmart	$	4	$	1	$	—		$	3	$	—	$	8
Sears Domestic	3		1		(3		)	1		1		3
Total for the 13-week period ended August 3, 2013	$	7	$	2	$	(3	)	$	4	$	1	$	11
Kmart	$	15	$	4	$	11		$	6	$	3	$	39
Sears Domestic	2		2		2			1		8		15
Sears Canada	1		9		5			—		—		15
Total for the 26-week period ended August 2, 2014	$	18	$	15	$	18		$	7	$	11	$	69
Kmart	$	9	$	2	$	(1	)	$	6	$	1	$	17
Sears Domestic	6		2		(6		)	3		9		14
Sears Canada	—		2		—			—		—		2
Total for the 26-week period ended August 3, 2013	$	15	$	6	$	(7	)	$	9	$	10	$	33

_____________

⁽¹⁾  Recorded within Cost of sales, buying and occupancy on the Condensed Consolidated Statements of Operations.

⁽²⁾  Recorded within Selling and administrative on the Condensed Consolidated Statements of Operations. Lease termination costs are net of estimated sublease income, and include the reversal of closed store reserves for which the lease agreement has been terminated and the reversal of deferred rent balances related to closed stores.

⁽³⁾  Costs for the 13-week period ended August 2, 2014 include $5 million recorded within Impairment charges and $1 million recorded within Depreciation and amortization on the Condensed Consolidated Statement of Operations. Costs for the 13-week period ended August 3, 2013 are recorded within Depreciation and amortization on the Condensed Consolidated Statements of Operations. Costs for the 26-week periods ended August 2, 2014 and August 3, 2013 include $10 million and $8 million recorded within Impairment charges, respectively, and $1 million and $2 million recorded within Depreciation and amortization, respectively, on the Condensed Consolidated Statements of Operations.

Store closing cost accruals of $175 million, $157 million and $199 million at August 2, 2014, August 3, 2013 and February 1, 2014, respectively, were as follows:

millions	Severance Costs			Lease Termination Costs			Other Charges			Total
Balance at August 3, 2013	$	23		$	119		$	15		$	157
Store closing costs	53			10			11			74
Store closing capital lease obligations	—			2			—			2
Payments/utilizations	(13		)	(12		)	(9		)	(34		)
Balance at February 1, 2014	63			119			17			199
Store closing costs	15			19			7			41
Payments/utilizations	(39		)	(13		)	(13		)	(65		)
Balance at August 2, 2014	$	39		$	125		$	11		$	175

Long-Lived Assets

In accordance with accounting standards governing the impairment or disposal of long-lived assets, we performed an impairment test of certain of our long-lived assets (principally the value of buildings and other fixed assets associated with our stores) due to events and changes in circumstances during the 13-week period ended August 2, 2014 that indicated an impairment might have occurred. The impairment review was triggered by a decline in operating performance at certain locations within the Sears Canada segment. As a result of this impairment testing, the Company recorded impairment charges of $15 million during the 13- and 26- week periods ended August 2, 2014 at Sears Canada.

Real Estate Transactions

During the first half of 2014, we recorded gains on the sales of assets of $80 million in connection with real estate transactions, which included a gain of $13 million recognized on the sale of a distribution facility in our Sears Domestic segment for which we received $16 million of cash proceeds and a gain of $10 million recognized on the sale of a Kmart store for which we received $10 million of cash proceeds.

Also, during the first half of 2014, we entered into agreements for the surrender and early termination of two Sears Full-line store leases for which we received $64 million of cash proceeds. The gains will be deferred until the lease termination agreements are effective and we have surrendered substantially all of our rights and obligations.

Additionally, during the second quarter of 2014, we recorded investment income of $23 million related to the sale of a 15% joint venture interest in one property Sears Canada owned with Ivanhoe Cambridge II Inc., for which Sears Canada received $30 million ($33 million Canadian) in cash proceeds.

During the first half of 2013, we recorded gains on the sales of assets of $255 million in connection with real estate transactions which included a gain of $180 million recognized in the second quarter on the amendment and early termination of the leases on two properties operated by Sears Canada for which Sears Canada received $184 million ($191 million Canadian) in cash proceeds. Gains on sales of assets recorded in the first half of 2013 also included gains of $55 million related to the sale of a store previously operated under The Great Indoors format, two Sears Full-line stores and one Kmart store for which the Company received $86 million of cash proceeds.

XML

EQUITY

6 Months Ended

Aug. 02, 2014

Stockholders' Equity Note [Abstract]

EQUITY

EQUITY

Accumulated Other Comprehensive Loss

The following table displays the components of accumulated other comprehensive loss:

millions	August 2, 2014			August 3, 2013			February 1, 2014
Pension and postretirement adjustments (net of tax of $(326), $(441) and $(328), respectively)	$	(975	)	$	(1,319	)	$	(1,036	)
Cumulative unrealized derivative gain (net of tax of $0 for all periods presented)	—			—			2
Currency translation adjustments (net of tax of $(37), $(40) and $(38), respectively)	(74		)	(66		)	(83		)
Accumulated other comprehensive loss	$	(1,049	)	$	(1,385	)	$	(1,117	)

Pension and postretirement adjustments relate to the net actuarial loss on our pension and postretirement plans recognized as a component of accumulated other comprehensive loss.

Accumulated other comprehensive loss attributable to noncontrolling interests at August 2, 2014, August 3, 2013 and February 1, 2014 was $42 million, $71 million and $53 million, respectively.

Income Tax Expense Allocated to Each Component of Other Comprehensive Income

Income tax expense allocated to each component of other comprehensive income was as follows:

	13 Weeks Ended August 2, 2014									13 Weeks Ended August 3, 2013
millions	Before Tax Amount			Tax Expense			Net of Tax Amount			Before Tax Amount			Tax Expense			Net of Tax Amount
Other comprehensive income
Pension and postretirement adjustments(1)	$	37		$	(2	)	$	35		$	49		$	(1	)	$	48
Deferred loss on derivatives	(1		)	—			(1		)	—			—			—
Currency translation adjustments	3			—			3			(20		)	—			(20		)
Total other comprehensive income	$	39		$	(2	)	$	37		$	29		$	(1	)	$	28

	26 Weeks Ended August 2, 2014									26 Weeks Ended August 3, 2013
millions	Before Tax Amount			Tax Expense			Net of Tax Amount			Before Tax Amount			Tax (Expense) Benefit			Net of Tax Amount
Other comprehensive income
Pension and postretirement adjustments(1)	$	68		$	(3	)	$	65		$	97		$	(3	)	$	94
Deferred loss on derivatives	(2		)	—			(2		)	—			—			—
Currency translation adjustments	15			(1		)	14			(28		)	1			(27		)
Total other comprehensive income	$	81		$	(4	)	$	77		$	69		$	(2	)	$	67

⁽¹⁾  Included in the computation of net periodic benefit expense. See Note 8 to the Condensed Consolidated Financial Statements.

Common Share Repurchase Program

During the 13- and 26- week periods ended August 2, 2014 and August 3, 2013, we did not repurchase any shares of our common stock under our common share repurchase program. At August 2, 2014, we had approximately $504 million of remaining authorization under our common share repurchase program.

The share repurchase program has no stated expiration date and share repurchases may be implemented using a variety of methods, which may include open market purchases, privately negotiated transactions, block trades, accelerated share repurchase transactions, the purchase of call options, the sale of put options or otherwise, or by any combination of such methods.

XML

INCOME TAXES

6 Months Ended

Aug. 02, 2014

Income Tax Disclosure [Abstract]

INCOME TAXES

INCOME TAXES

We had gross unrecognized tax benefits of $141 million at August 2, 2014, $142 million at August 3, 2013 and $150 million at February 1, 2014. Of the amount at August 2, 2014, $86 million, would, if recognized, impact our effective tax rate, with the remaining amount being comprised of unrecognized tax benefits related to gross temporary differences or any other indirect benefits. During the 13-week period ended August 2, 2014, we made no reductions to gross unrecognized tax benefits. During the 26-week period ended August 2, 2014, gross unrecognized tax benefits were decreased by $9 million due to the Lands' End spin-off and foreign activity. During the 13- and 26- week periods ended August 3, 2013, gross unrecognized tax benefits were decreased by $9 million and $19 million, respectively, due to foreign and state audit activity. We expect that our unrecognized tax benefits could decrease by as much as $6 million over the next 12 months for tax audit settlements and the expiration of the statute of limitations for certain jurisdictions.

We classify interest expense and penalties related to unrecognized tax benefits and interest income on tax overpayments as components of income tax expense. At August 2, 2014, August 3, 2013 and February 1, 2014, the total amount of interest and penalties included in our tax accounts in our Condensed Consolidated Balance Sheet was $53 million ($36 million net of federal benefit), $51 million ($35 million net of federal benefit), and $53 million ($36 million net of federal benefit), respectively. The total amount of net interest expense recognized as part of income tax expense in our Condensed Consolidated Statements of Operations was $1 million and $3 million (net of federal benefit) for the 13- and 26- week periods ended August 2, 2014, respectively.

On April 4, 2014, Holdings and Lands' End entered into a tax sharing agreement in connection with the spin-off. Pursuant to this agreement, Holdings is responsible for all pre-separation U.S. federal, state and local income taxes attributable to the Lands’ End business, and Lands’ End is responsible for all other income taxes attributable to its business, including all foreign taxes.

We file income tax returns in the United States, as well as various foreign jurisdictions. The IRS has completed its examination of all federal income tax returns of Holdings through the 2009 return, and all matters arising from such examinations have been resolved. In addition, Holdings and Sears are under examination by various state, local and foreign income tax jurisdictions for the years 2002 through 2012, and Kmart is under examination by such jurisdictions for the years 2003 through 2012.

At the end of 2013, we had a federal and state net operating loss ("NOL") deferred tax asset of $1.2 billion, which will expire predominately between 2019 and 2034. We have credit carryforwards of $721 million, which will expire between 2015 and 2034.

At February 1, 2014, we had a valuation allowance of $3.4 billion to record only the portion of the deferred tax asset that more likely than not will be realized. The amount of the deferred tax asset considered realizable, however, could be adjusted in the future if estimates of future taxable income during the carryforward period are reduced or increased, or if objective negative evidence in the form of cumulative losses is no longer present and additional weight may be given to subjective evidence such as our projections for growth. We will continue to evaluate our valuation allowance as the year progresses for any change in circumstances that causes a change in judgment about the realizability of the deferred tax asset. This evaluation includes our foreign deferred tax assets which the Company currently believes are more likely than not realizable, but it is reasonably possible that this belief could change in the near term requiring establishment of additional valuation allowances.

The application of the requirements for accounting for income taxes in interim periods, after consideration of our valuation allowance, causes a significant variation in the typical relationship between income tax expense and pretax accounting income. For the second quarter of 2014, our effective income tax rate was an expense of 5.8%. Our tax rate continues to reflect the effect of not recognizing the benefit of current period losses in certain domestic jurisdictions where it is not more likely than not that such benefits would be realized. In addition, the first half of 2014 was negatively impacted by increased foreign taxes in Puerto Rico resulting from a new tax law change which became effective during the second quarter of 2014, as well as a tax settlement, but was partially offset by current period losses attributable to Sears Canada.

XML

Total Borrowings (Detail) (USD $)	Aug. 02, 2014	Feb. 01, 2014	Aug. 03, 2013
Short-term borrowings:
Unsecured commercial paper	$ 7,000,000	$ 9,000,000	$ 247,000,000
Secured borrowings	1,397,000,000	1,323,000,000	1,509,000,000
Long-term debt, including current portion:
Notes and debentures outstanding	2,566,000,000	2,571,000,000	1,582,000,000
Capitalized lease obligations	334,000,000	346,000,000	404,000,000
Fair value of long-term debt	2,300,000,000	2,300,000,000	1,500,000,000
Debt and Capital Lease Obligations	$ 4,304,000,000	$ 4,249,000,000	$ 3,742,000,000

XML

BENEFIT PLANS - Additional Information (Detail) (USD $) In Millions, unless otherwise specified	3 Months Ended		6 Months Ended
	Aug. 02, 2014	Aug. 03, 2013	Aug. 02, 2014	Aug. 03, 2013
Defined Benefit Plan Disclosure [Line Items]
Contributions to pension and post-retirement plans	$ 103	$ 87	$ 205	$ 176
Anticipated aggregate contributions to domestic and Canadian defined benefit plans over remainder of fiscal 2013			$ 255
Document Fiscal Year Focus			2014

XML

RELATED PARTY DISCLOSURE

6 Months Ended

Aug. 02, 2014

Related Party Transactions [Abstract]

RELATED PARTY DISCLOSURE

RELATED PARTY DISCLOSURE

Investment of Surplus Cash

Our Board has delegated authority to direct investment of our surplus cash to Edward S. Lampert, subject to various limitations that have been or may be from time to time adopted by the Board of Directors and/or the Finance Committee of the Board of Directors. Mr. Lampert is Chairman of our Board of Directors and its Finance Committee and is the Chairman and Chief Executive Officer of ESL. Additionally, on February 1, 2013, Mr. Lampert became our Chief Executive Officer, in addition to his role as Chairman of the Board. Neither Mr. Lampert nor ESL will receive compensation for any such investment activities undertaken on our behalf, other than Mr. Lampert's compensation as our Chief Executive Officer. ESL beneficially owned approximately 48% of our outstanding common stock at August 2, 2014.

Further, to clarify the expectations that the Board of Directors has with respect to the investment of our surplus cash, the Board has renounced, in accordance with Delaware law, any interest or expectancy of the Company associated with any investment opportunities in securities that may come to the attention of Mr. Lampert or any employee, officer, director or advisor to ESL and its affiliated investment entities (each, a “Covered Party”) who also serves as an officer or director of the Company other than (a) investment opportunities that come to such Covered Party’s attention directly and exclusively in such Covered Party’s capacity as a director, officer or employee of the Company, (b) control investments in companies in the mass merchandising, retailing, commercial appliance distribution, product protection agreements, residential and commercial product installation and repair services and automotive repair and maintenance industries and (c) investment opportunities in companies or assets with a significant role in our retailing business, including investment in real estate currently leased by the Company or in suppliers for which the Company is a substantial customer representing over 10% of such companies’ revenues, but excluding investments of ESL that were existing as of May 23, 2005.

Unsecured Commercial Paper

During the first half of 2014 and 2013, ESL and its affiliates held unsecured commercial paper issued by Sears Roebuck Acceptance Corp. (“SRAC”), an indirect wholly owned subsidiary of Sears Holdings. For the commercial paper outstanding to ESL, the weighted average of each of maturity, annual interest rate, and principal amount outstanding was 30.7 days, 2.78% and $25.3 million and 30.6 days, 2.78% and $273 million, respectively, in the first half of 2014 and 2013. The largest aggregate amount of principal outstanding to ESL at any time since the beginning of 2014 was $150 million and $0.4 million interest was paid by SRAC to ESL during the first half of 2014. ESL held $235 million in principal amount of commercial paper at August 3, 2013, which included $143 million held by Mr. Lampert. Neither ESL nor Mr. Lampert held any of our commercial paper at August 2, 2014 or February 1, 2014. The commercial paper purchases were made in the ordinary course of business on substantially the same terms, including interest rates, as terms prevailing for comparable transactions with other persons, and did not present features unfavorable to the Company.

Senior Secured Notes

At August 2, 2014, Mr. Lampert and ESL held an aggregate of $205 million of principal amount of the Company's 6 5/8% Senior Secured Notes due 2018 (the "6 5/8%" Notes") and $3 million of principal amount of unsecured notes issued by SRAC (the "Subsidiary Notes"). At August 3, 2013 and February 1, 2014, Mr. Lampert and ESL held an aggregate of $95 million of principal amount of 6 5/8% Notes and $3 million of principal amount of Subsidiary Notes.

Trade Receivable Put Agreements

On January 26, 2012, ESL entered into an agreement with a financial institution to acquire from the financial institution an undivided participating interest in a certain percentage of its rights and obligations under trade receivable put agreements that were entered into with certain vendors of the Company. These agreements generally provide that, in the event of a bankruptcy filing by the Company, the financial institution will purchase such vendors’ accounts receivable arising from the sale of goods or services to the Company. ESL may from time to time choose to purchase an 80% undivided participating interest in the rights and obligations primarily arising under future trade receivable put agreements that the financial institution enters into with our vendors during the term of its agreement. The Company is neither a party nor will it become a party to any of these agreements. At February 1, 2014, and August 3, 2013 ESL held a participation interest totaling $80 million and $97 million, respectively, in the financial institution’s agreements relating to the Company. At August 2, 2014, ESL held no participating interest.

Sears Canada

ESL owns approximately 28% of the outstanding common shares of Sears Canada.

Lands' End

ESL owns approximately 49% of the outstanding common stock of Lands’ End (based on publicly available information as of April 8, 2014). Holdings, and certain of its subsidiaries, entered into a transition services agreement in connection with the spin-off pursuant to which Lands’ End and Holdings will provide to each other, on an interim, transitional basis, various services, which may include, but are not limited to, tax services, logistics services, auditing and compliance services, inventory management services, information technology services and continued participation in certain contracts shared with Holdings and its subsidiaries, as well as agreements related to Lands' End Shops at Sears and participation in the Shop Your Way program.

Amounts due to or from Lands’ End are non-interest bearing, and generally settled on a net basis. Holdings invoices Lands’ End on at least a monthly basis. At August 2, 2014, Holdings reported a net amount receivable from Lands' End of $3 million in the Accounts receivable line of the Condensed Consolidated Balance Sheets. Amounts related to revenue from retail services and rent for Lands' End Shops at Sears, participation in the Shop Your Way program, and corporate shared services were $18 million and $24 million, respectively, for the 13- and 26- week periods ended August 2, 2014. The amounts Lands' End earned related to call center services and commissions were $3 million and $4 million, respectively, for the 13- and 26- week periods ended August 2, 2014.

SHO

Holdings, and certain of its subsidiaries, engage in transactions with SHO pursuant to various agreements with SHO which, among other things, (1) govern the principal transactions relating to the rights offering and certain aspects of our relationship with SHO following the separation, (2) establish terms under which Holdings and certain of its subsidiaries will provide SHO with services, and (3) establish terms pursuant to which Holdings and certain of its subsidiaries will obtain merchandise for SHO. ESL owns approximately 47% of the outstanding common stock of SHO (based on publicly available information as of July 31, 2014).

These agreements were made in the context of a parent-subsidiary relationship and were negotiated in the overall context of the separation. The Company believes that the methods by which costs are allocated are reasonable and are based on prorated estimates of costs expected to be incurred by the Company. A summary of the nature of related party transactions involving SHO is as follows:

• SHO obtains a significant amount of its merchandise from the Company. We have also entered into certain agreements with SHO to provide logistics, handling, warehouse and transportation services. SHO also pays a royalty related to the sale of Kenmore, Craftsman and DieHard products and fees for participation in the SHOP YOUR WAY program.

• SHO receives commissions from the Company for the sale of merchandise made through www.sears.com, extended service agreements, delivery and handling services and credit revenues.

• The Company provides SHO with shared corporate services. These services include accounting and finance, legal, human resources, information technology and real estate.

Amounts due to or from SHO are non-interest bearing, settled on a net basis, and have payment terms of 10 days after the invoice date. The Company invoices SHO on a weekly basis. At August 2, 2014, August 3, 2013 and February 1, 2014, Holdings reported a net amount receivable from SHO of $84 million, $77 million and $68 million, respectively, in the Accounts receivable line of the Condensed Consolidated Balance Sheets. Amounts related to the sale of inventory and related services, royalties, and corporate shared services were $441 million and $854 million, respectively, for the 13- and 26- week periods ended August 2, 2014, and $451 million and $885 million, respectively, for the 13- and 26- week periods ended August 3, 2013. The net amounts SHO earned related to commissions were $27 million and $55 million, respectively, for the 13- and 26- week periods ended August 2, 2014, and $24 million and $63 million, respectively, for the 13- and 26- week periods ended August 3, 2013. Additionally, the Company has guaranteed lease obligations for certain SHO store leases that were assigned as a result of the separation. See Note 4 of our Annual Report on Form 10-K for the fiscal year ended February 1, 2014 for further information related to these guarantees.

Also in connection with the separation, the Company entered into an agreement with SHO and the agent under SHO's secured credit facility, whereby the Company committed to continue to provide services to SHO in connection with a realization on the lender's collateral after default under the secured credit facility, notwithstanding SHO's default under the underlying agreement with us, and to provide certain notices and services to the agent, for so long as any obligations remain outstanding under the secured credit facility.

XML

FAIR VALUE OF FINANCIAL ASSETS AND LIABILITIES (Tables)

6 Months Ended

Aug. 02, 2014

Fair Value Disclosures [Abstract]

Fair Value Measurement Amounts for Other Financial Assets and Liabilities Recorded in Condensed Consolidated Balance Sheets at Fair Value

The following tables provide the fair value measurement amounts for other financial assets and liabilities recorded in our Condensed Consolidated Balance Sheets at fair value at August 2, 2014, August 3, 2013 and February 1, 2014:

millions	Total Fair Value Amounts at August 2, 2014		Level 1		Level 2		Level 3
Cash equivalents(1)	$	55	$	55	$	—	$	—
Restricted cash(2)	10		10		—		—
Foreign currency derivative assets(3)	4		—		4		—
Total	$	69	$	65	$	4	$	—

millions	Total Fair Value Amounts at August 3, 2013			Level 1		Level 2			Level 3
Cash equivalents(1)	$	211		$	211	$	—		$	—
Restricted cash(2)	10			10		—			—
Foreign currency derivative assets(3)	1			—		1			—
Foreign currency derivative liabilities(4)	(1		)	—		(1		)	—
Total	$	221		$	221	$	—		$	—

millions	Total Fair Value Amounts at February 1, 2014		Level 1		Level 2		Level 3
Cash equivalents(1)	$	346	$	346	$	—	$	—
Restricted cash(2)	10		10		—		—
Foreign currency derivative assets(3)	8		—		8		—
Total	$	364	$	356	$	8	$	—

⁽¹⁾  Included within Cash and cash equivalents in our Condensed Consolidated Balance Sheets.

⁽²⁾  Included within Restricted cash in our Condensed Consolidated Balance Sheets.

⁽³⁾  Included within Prepaid expenses and other current assets in our Condensed Consolidated Balance Sheets.

⁽⁴⁾  Included within Accrued expenses and other current liabilities in our Condensed Consolidated Balance Sheets.

XML

EQUITY (Income Tax Expense Allocated to Each Component of Other Comprehensive Income) (Loss) (Detail) (USD $) In Millions, unless otherwise specified	3 Months Ended		6 Months Ended
	Aug. 02, 2014	Aug. 03, 2013	Aug. 02, 2014	Aug. 03, 2013
Stockholders' Equity Note [Abstract]
Other Comprehensive (Income) Loss, Pension and Other Postretirement Benefit Plans, Adjustment, before Tax	$ 37	$ 49	$ 68	$ 97
Other comprehensive income (loss) Pension and postretirement adjustments, net of tax amount
Pension and postretirement adjustments, net of tax	35	48	65	94
Currency translation adjustments, net of tax	3	(20)	14	(27)
Total other comprehensive income	37	28	77	67
Other Comprehensive (Income) Loss, Pension and Other Postretirement Benefit Plans, Tax	(2)	(1)	(3)	(3)
Other Comprehensive Income (Loss), Unrealized Gain (Loss) on Derivatives Arising During Period, before Tax	(1)	0	(2)	0
Other Comprehensive Income (Loss), Unrealized Gain (Loss) on Derivatives Arising During Period, Tax	0	0	0	0
Other Comprehensive Income (Loss), Derivatives Qualifying as Hedges, Net of Tax	(1)	0	(2)	0
Other Comprehensive Income (Loss), Foreign Currency Transaction and Translation Adjustment, before Tax	3	(20)	15	(28)
Other Comprehensive Income (Loss), Foreign Currency Translation Adjustment, Tax	0	0	(1)	1
Other Comprehensive Income (Loss), before Tax	39	29	81	69
Other Comprehensive Income (Loss), Tax	$ (2)	$ (1)	$ (4)	$ (2)

XML

DERIVATIVE FINANCIAL INSTRUMENTS DERIVATIVE FINANCIAL INSTRUMENTS (Details) (USD $) In Millions, unless otherwise specified	3 Months Ended	6 Months Ended
	Aug. 02, 2014	Aug. 02, 2014
Derivative [Line Items]
Document Fiscal Year Focus		2014
Forward Contracts [Member]
Derivative [Line Items]
Derivative Asset, Notional Amount	$ 300	$ 300
Average Remaining Maturity of Foreign Currency Derivatives		27 days
Settlement Of Foreign Currency Contracts Received Paid	0.5	1.0
Foreign Exchange Option [Member]
Derivative [Line Items]
Derivative, Notional Amount	$ 205	$ 205

XML

Condensed Consolidated Balance Sheets Parenthetical (USD $) In Millions, unless otherwise specified	Aug. 02, 2014	Feb. 01, 2014	Aug. 03, 2013
Unsecured commercial paper	$ 7	$ 9	$ 247
Sears Hometown and Outlet Stores, Inc. [Member]
Due from Related Parties, Current	84	68	77
Esl Investments Inc [Member] | Sears Roebuck Acceptance Corp [Member]
Unsecured commercial paper	0	0	235
Secured Long-term Debt, Noncurrent	205	95	95
Subsidiary notes	$ 3	$ 3	$ 3

XML

DERIVATIVE FINANCIAL INSTRUMENTS DERIVATIVE FINANCIAL INSTRUMENTS

6 Months Ended

Aug. 02, 2014

Derivative Instruments and Hedging Activities Disclosures [Line Items]

Derivative Instruments and Hedging Activities Disclosure [Text Block]

DERIVATIVE FINANCIAL INSTRUMENTS

We primarily use derivatives as a risk management tool to decrease our exposure to fluctuations in the foreign currency market, and do not use derivative financial instruments for trading or speculative purposes. We are exposed to fluctuations in foreign currency exchange rates as a result of our net investment in Sears Canada. Further, Sears Canada is exposed to fluctuations in foreign currency exchange rates due to inventory purchase contracts denominated in U.S. dollars. The recorded amounts and corresponding gains on the hedging activity were not material at August 2, 2014, August 3, 2013 or February 1, 2014, or for the 13- and 26- week periods ended August 2, 2014 or August 3, 2013.

Hedges of Net Investment in Sears Canada

During the second quarter of 2014, we entered into foreign currency forward contracts with a total Canadian notional value of $300 million, and with a weighted-average remaining life of 0.1 years at August 2, 2014. These contracts were designated and qualify as hedges of the foreign currency exposure of our net investment in Sears Canada.

For derivatives that were designated as hedges of our net investment in Sears Canada, we assess effectiveness based on changes in forward currency exchange rates. Changes in forward rates on the derivatives are recorded in the currency translation adjustments line in accumulated other comprehensive loss and will remain there until we substantially liquidate or sell our holdings in Sears Canada.

We settled foreign currency forward contracts during the 13-week period ended August 2, 2014 and will pay $0.5 million relative to these contract settlements. We settled foreign currency forward contracts and received net amounts of $1 million during the 26-week period ended August 2, 2014, relative to these contract settlements. As hedge accounting was applied to these contracts, an offsetting amount was recorded as a component of other comprehensive loss.

Sears Canada Hedges of Merchandise Purchases

At August 2, 2014, Sears Canada had $205 million notional amount of foreign exchange forward contracts. These forward contracts are used to reduce the foreign exchange risk with respect to U.S. dollar denominated assets and liabilities and purchases of goods or services.

Sears Canada has merchandise purchase contracts denominated in U.S. currency. The merchandise purchase contracts are considered embedded derivatives under relevant accounting rules.

We record mark-to-market adjustments for the fair value of forward contracts and embedded derivatives at the end of each period. Changes in the fair value of any derivatives that are not designated as hedges are recorded in earnings each period. Sears Canada mitigates the risk of foreign currency exchange rates by entering into foreign exchange forward contracts. Since the Company's functional currency is the U.S. dollar, we are not directly exposed to the risk of exchange rate changes due to Sears Canada's contracts, and therefore we do not account for these instruments as a hedge of our foreign currency exposure risk.

Counterparty Credit Risk

We actively manage the risk of nonpayment by our derivative counterparties by limiting our exposure to individual counterparties based on credit ratings, value at risk and maturities. The counterparties to these instruments are major financial institutions with investment grade credit ratings or better at August 2, 2014, August 3, 2013 and February 1, 2014.

XML

Condensed Consolidating Statement of Operations (Detail) (USD $) In Millions, unless otherwise specified	3 Months Ended				6 Months Ended
	Aug. 02, 2014		Aug. 03, 2013		Aug. 02, 2014		Aug. 03, 2013
Condensed Financial Statements, Captions [Line Items]
Merchandise sales and services	$ 8,013	[1]	$ 8,871	[1]	$ 15,892	[1]	$ 17,323	[1]
Cost of sales, buying and occupancy	6,271	[1]	6,685	[1]	12,322	[1]	12,981	[1]
Selling and administrative	2,118		2,291		4,207		4,509
Depreciation and amortization	152		187		307		378
Asset Impairment Charges	20		0		25		8
Gain on sales of assets	(34)		(241)		(80)		(255)
Costs and Expenses	8,527		8,922		16,781		17,621
Operating income (loss)	(514)		(51)		(889)		(298)
Interest Expense	(72)		(59)		(143)		(120)
Investment Income, Net	32		14		36		21
Other Nonoperating Income (Expense)	5		(1)		2		(1)
Income (loss) before income taxes	(549)		(97)		(994)		(398)
Income Tax Expense (Benefit)	(32)		(30)		(29)		(21)
Equity In Earnings Of Subsidiaries	0		0		0		0
Net income (loss)	(581)		(127)		(1,023)		(419)
Net Income (Loss) Attributable to Noncontrolling Interest	(8)		67		(48)		54
NET INCOME (LOSS) ATTRIBUTABLE TO HOLDINGS’ SHAREHOLDERS	(573)		(194)		(975)		(473)
Parent
Condensed Financial Statements, Captions [Line Items]
Merchandise sales and services	0		0		0		0
Cost of sales, buying and occupancy	0		0		0		0
Selling and administrative	1		1		1		1
Depreciation and amortization	0		0		0		0
Asset Impairment Charges	0				0		0
Gain on sales of assets	0		0		0		0
Costs and Expenses	1		1		1		1
Operating income (loss)	(1)		(1)		(1)		(1)
Interest Expense	(53)		(55)		(104)		(110)
Investment Income, Net	0		0		0		0
Other Nonoperating Income (Expense)	0		0		0		0
Income (loss) before income taxes	(54)		(56)		(105)		(111)
Income Tax Expense (Benefit)	0		0		0		0
Equity In Earnings Of Subsidiaries	(527)		(71)		(918)		(308)
Net income (loss)	(581)		(127)		(1,023)		(419)
Net Income (Loss) Attributable to Noncontrolling Interest	0		0		0		0
NET INCOME (LOSS) ATTRIBUTABLE TO HOLDINGS’ SHAREHOLDERS	(581)		(127)		(1,023)		(419)
Guarantor Subsidiaries
Condensed Financial Statements, Captions [Line Items]
Merchandise sales and services	7,315		8,030		14,516		15,608
Cost of sales, buying and occupancy	5,793		6,121		11,407		11,888
Selling and administrative	2,079		2,219		4,070		4,306
Depreciation and amortization	115		142		231		286
Asset Impairment Charges	5				10		8
Gain on sales of assets	(34)		(60)		(67)		(74)
Costs and Expenses	7,958		8,422		15,651		16,414
Operating income (loss)	(643)		(392)		(1,135)		(806)
Interest Expense	(111)		(90)		(221)		(184)
Investment Income, Net	9		10		18		19
Other Nonoperating Income (Expense)	0		0		0		0
Income (loss) before income taxes	(745)		(472)		(1,338)		(971)
Income Tax Expense (Benefit)	1		37		47		86
Equity In Earnings Of Subsidiaries	125		281		174		408
Net income (loss)	(619)		(154)		(1,117)		(477)
Net Income (Loss) Attributable to Noncontrolling Interest	0		0		0		0
NET INCOME (LOSS) ATTRIBUTABLE TO HOLDINGS’ SHAREHOLDERS	(619)		(154)		(1,117)		(477)
Non-Guarantor Subsidiaries
Condensed Financial Statements, Captions [Line Items]
Merchandise sales and services	1,530		1,780		3,052		3,475
Cost of sales, buying and occupancy	903		1,037		1,760		1,949
Selling and administrative	445		537		967		1,106
Depreciation and amortization	37		45		76		92
Asset Impairment Charges	15				15		0
Gain on sales of assets	0		(181)		(13)		(181)
Costs and Expenses	1,400		1,438		2,805		2,966
Operating income (loss)	130		342		247		509
Interest Expense	(52)		(22)		(47)		(48)
Investment Income, Net	167		112		247		224
Other Nonoperating Income (Expense)	5		(1)		2		(1)
Income (loss) before income taxes	250		431		449		684
Income Tax Expense (Benefit)	(33)		(67)		(76)		(107)
Equity In Earnings Of Subsidiaries	0		0		0		0
Net income (loss)	217		364		373		577
Net Income (Loss) Attributable to Noncontrolling Interest	0		0		0		0
NET INCOME (LOSS) ATTRIBUTABLE TO HOLDINGS’ SHAREHOLDERS	217		364		373		577
Eliminations
Condensed Financial Statements, Captions [Line Items]
Merchandise sales and services	(832)		(939)		(1,676)		(1,760)
Cost of sales, buying and occupancy	(425)		(473)		(845)		(856)
Selling and administrative	(407)		(466)		(831)		(904)
Depreciation and amortization	0		0		0		0
Asset Impairment Charges	0				0		0
Gain on sales of assets	0		0		0		0
Costs and Expenses	(832)		(939)		(1,676)		(1,760)
Operating income (loss)	0		0		0		0
Interest Expense	144		108		229		222
Investment Income, Net	(144)		(108)		(229)		(222)
Other Nonoperating Income (Expense)	0		0		0		0
Income (loss) before income taxes	0		0		0		0
Income Tax Expense (Benefit)	0		0		0		0
Equity In Earnings Of Subsidiaries	402		(210)		744		(100)
Net income (loss)	402		(210)		744		(100)
Net Income (Loss) Attributable to Noncontrolling Interest	(8)		67		(48)		54
NET INCOME (LOSS) ATTRIBUTABLE TO HOLDINGS’ SHAREHOLDERS	$ 410		$ (277)		$ 792		$ (154)

[1] Includes merchandise sales to Sears Hometown and Outlet Stores, Inc. ("SHO") of $383 million and $386 million for the 13 weeks ended August 2, 2014 and August 3, 2013, respectively and $741 million and $755 million for the 26 weeks ended August 2, 2014 and August 3, 2013, respectively. Pursuant to the terms of the separation, merchandise is sold to SHO at cost.

XML

STORE CLOSING COSTS, IMPAIRMENTS AND REAL ESTATE TRANSACTIONS STORE CLOSING COSTS, IMPAIRMENTS AND REAL ESTATE TRANSACTIONS (Tables)

6 Months Ended

Aug. 02, 2014

Restructuring and Related Activities [Abstract]

Schedule of Restructuring Reserve by Type of Cost [Table Text Block]

Store closing cost accruals of $175 million, $157 million and $199 million at August 2, 2014, August 3, 2013 and February 1, 2014, respectively, were as follows:

millions	Severance Costs			Lease Termination Costs			Other Charges			Total
Balance at August 3, 2013	$	23		$	119		$	15		$	157
Store closing costs	53			10			11			74
Store closing capital lease obligations	—			2			—			2
Payments/utilizations	(13		)	(12		)	(9		)	(34		)
Balance at February 1, 2014	63			119			17			199
Store closing costs	15			19			7			41
Payments/utilizations	(39		)	(13		)	(13		)	(65		)
Balance at August 2, 2014	$	39		$	125		$	11		$	175

Restructuring and Related Costs [Table Text Block]

Store closing costs and severance recorded for the 13- and 26- week periods ended August 2, 2014 and August 3, 2013 were as follows:

millions	Markdowns(1)		Severance Costs(2)		Lease Termination Costs(2)			Other Charges(2)		Impairment and Accelerated Depreciation(3)		Total Store Closing Costs
Kmart	$	10	$	3	$	11		$	3	$	3	$	30
Sears Domestic	—		2		4			1		3		10
Sears Canada	1		4		—			—		—		5
Total for the 13-week period ended August 2, 2014	$	11	$	9	$	15		$	4	$	6	$	45
Kmart	$	4	$	1	$	—		$	3	$	—	$	8
Sears Domestic	3		1		(3		)	1		1		3
Total for the 13-week period ended August 3, 2013	$	7	$	2	$	(3	)	$	4	$	1	$	11
Kmart	$	15	$	4	$	11		$	6	$	3	$	39
Sears Domestic	2		2		2			1		8		15
Sears Canada	1		9		5			—		—		15
Total for the 26-week period ended August 2, 2014	$	18	$	15	$	18		$	7	$	11	$	69
Kmart	$	9	$	2	$	(1	)	$	6	$	1	$	17
Sears Domestic	6		2		(6		)	3		9		14
Sears Canada	—		2		—			—		—		2
Total for the 26-week period ended August 3, 2013	$	15	$	6	$	(7	)	$	9	$	10	$	33

_____________

⁽¹⁾  Recorded within Cost of sales, buying and occupancy on the Condensed Consolidated Statements of Operations.

⁽²⁾  Recorded within Selling and administrative on the Condensed Consolidated Statements of Operations. Lease termination costs are net of estimated sublease income, and include the reversal of closed store reserves for which the lease agreement has been terminated and the reversal of deferred rent balances related to closed stores.

⁽³⁾  Costs for the 13-week period ended August 2, 2014 include $5 million recorded within Impairment charges and $1 million recorded within Depreciation and amortization on the Condensed Consolidated Statement of Operations. Costs for the 13-week period ended August 3, 2013 are recorded within Depreciation and amortization on the Condensed Consolidated Statements of Operations. Costs for the 26-week periods ended August 2, 2014 and August 3, 2013 include $10 million and $8 million recorded within Impairment charges, respectively, and $1 million and $2 million recorded within Depreciation and amortization, respectively, on the Condensed Consolidated Statements of Operations.

XML

BORROWINGS (Sears Canada Credit Agreement) (Details) In Millions, unless otherwise specified				3 Months Ended
	Aug. 02, 2014 USD ($)	Feb. 01, 2014 USD ($)	Aug. 03, 2013 USD ($)	Jul. 31, 2010 Five Year Revolving Credit Facility [Member]	Aug. 02, 2014 Domestic Credit Agreement USD ($)	Feb. 01, 2014 Domestic Credit Agreement USD ($)	Aug. 03, 2013 Domestic Credit Agreement USD ($)	Apr. 30, 2011 Domestic Credit Agreement USD ($)	Aug. 02, 2014 Sears Canada [Member] Revolving Credit Facility [Member] USD ($)	Aug. 02, 2014 Sears Canada [Member] Revolving Credit Facility [Member] CAD	May 28, 2014 Sears Canada [Member] Revolving Credit Facility [Member] USD ($)	Feb. 01, 2014 Sears Canada [Member] Revolving Credit Facility [Member] USD ($)	Feb. 01, 2014 Sears Canada [Member] Revolving Credit Facility [Member] CAD	Aug. 03, 2013 Sears Canada [Member] Revolving Credit Facility [Member] USD ($)	Aug. 03, 2013 Sears Canada [Member] Revolving Credit Facility [Member] CAD	Sep. 30, 2010 Sears Canada [Member] Revolving Credit Facility [Member] USD ($)
Line of Credit Facility [Line Items]
Line of Credit Facility, Original Term				5 years
Line of Credit Facility, Maximum Borrowing Capacity								$ 3,275			$ 300					$ 800
Line of Credit Facility, Amount Outstanding	1,397	1,323	1,509		1,400	1,300	1,500		0
Line of Credit Facility, Remaining Borrowing Capacity					240	549	759		246	268		336	374	530	551
Line Of Credit Facility, Reduction in Borrowing Capacity									$ 122

XML

RECENT ACCOUNTING PRONOUNCEMENTS

6 Months Ended

Aug. 02, 2014

New Accounting Pronouncements and Changes in Accounting Principles [Abstract]

RECENT ACCOUNTING PRONOUNCEMENTS

RECENT ACCOUNTING PRONOUNCEMENTS

Revenue from Contracts with Customers

In May 2014, the Financial Accounting Standards Board (“FASB”) issued an accounting standards update which replaces the current revenue recognition standards. The new revenue recognition standard provides a five-step analysis of transactions to determine when and how revenue is recognized. The core principle is that a company should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. This update will be effective for the Company in the first quarter of 2017 and may be applied retrospectively for each period presented or as a cumulative-effect adjustment at the date of adoption. The Company is evaluating the effect of adopting this new standard.

Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity

In April 2014, the FASB issued an accounting standards update which modifies the requirements for disposals to qualify as discontinued operations and expands related disclosure requirements. The update will be effective for the Company in the first quarter of 2015, and early adoption of the update is permitted. The adoption of the update may impact whether future disposals qualify as discontinued operations and therefore could impact the Company's financial statement presentation and disclosures.

Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists

In July 2013, the FASB issued an accounting standards update which requires an unrecognized tax benefit to be presented as a reduction to a deferred tax asset for a net operating loss carryforward, a similar tax loss or a tax credit carryforward that the entity intends to use and is available for settlement at the reporting date. The update was effective and adopted by the Company in the first quarter of 2014 and impacted the Company's disclosures, but otherwise did not have a material impact on the Company's condensed consolidated financial position, results of operations or cash flows.